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CBN Tightens Control of Identity Database to Check Fraud



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Online payments reached record heights in Nigeria in the third quarter of 2020, when the value of transactions increased to $116 billion from $68.3 billion in the same period in 2019.

CBN Tightens Control of Identity Database to Check Fraud

But this welcome jump came with a staggering increase in financial fraud.

According to Quartz Africa, between January and September 2020, fraudsters made over 46,000 attempts on customer accounts, three times the level for the same period the year before. 91% of those attempts succeeded.

In the 9 months between January and September 2020, fraudsters stole N5 billion ($12 million) from customer accounts (pdf), the equivalent of 173,000 Nigerian workers’ minimum wage for a month.

The trend sets Nigeria back as it pivots to a cashless financial system that was, among other things, motivated by a desire to prevent financial fraud.

In response, Central Bank of Nigeria (CBN) has published new guidelines this week to tighten the screws around the system behind the unique 11-digital bank verification numbers (BVNs) that identify bank customers.

And by doing so, the regulator is upgrading its watchlist to more easily track offenders.

CBN is safeguarding a crucial fintech backbone

Since Nigeria introduced BVNs in 2014, every bank customer has been mandated to get one, except for entry-level accounts that have a N50,000 (about $100) maximum deposit limits. Customers provide personal biodata, and biometrics at a bank branch or through an agent to a BVN.

As of April 2020, there were 41 million BVNs in Nigeria. Since a customer can only have one regardless of how many bank accounts, it is the best proxy for knowing how many Nigerians are included in the formal financial system. BVNs are arguably the foundational identity instruments that have enabled Nigeria’s fintech boom, especially because no trusted digital identity standard existed before them.

But the CBN and other key actors responsible for managing the BVN database—namely banks, and the Nigeria Inter-bank Settlement Scheme (NIBSS)—appear to have been lax in managing the BVN database over the years.

Anecdotes and at least one research study suggest that fraudsters have used customer BVNs to steal money from unsuspecting customers.

Fraud was so pervasive that some fintechs, including Paystack, were cut off from having access to the database in April.

With the new guidelines, the CBN clarifies the kind of companies with access to the database and under what terms.

Banks are central to Nigeria’s financial watchlist

Banks, and other Nigerian financial institutions that are not payment service providers can access the BVN database, without the CBN’s approval.

This covers digital banking startups like Carbon, Fairmoney, and Kuda which have requisite banking licenses that qualify them.

But payment service providers like Paystack, and credit bureaus need access from NIBSS, and even then customers’ consent is required.

If a breach is associated with the operation of your account/wallet, you agree that we have the right to apply restrictions to your account/wallet and report to appropriate law enforcement agencies in line with extant laws.

But for the privilege they are given, banks will have to be central to populating the CBN’s watchlist, which is basically a record of the BVNs of customers who have been involved in confirmed cases of breaches.

Banks have to report such customers’ BVNs to the watchlist within one business day, the CBN said.

In addition, bank apps will be plugged to the watchlist so that anyone who wants to run a check during a transaction can know the status of an account.

In fact, banks will start showing a disclaimer along these lines to customers:

“If a breach is associated with the operation of your account/wallet, you agree that we have the right to apply restrictions to your account/wallet and report to appropriate law enforcement agencies in line with extant laws.”

What counts as a breach?

Because the CBN has shut down accounts this year for reasons like trading cryptocurrency or enabling dollar-denominated stock investing, a watchlist that punishes customer offenses raises some eyebrows.

It is probably why the CBN lists 23 so-called breaches in the new guidelines.

The list includes obviously problematic acts like using forged documents, identity theft, extortion, receipt of fraudulent proceeds, and refusing to reverse payments received in error when asked to. Some others are more nebulous, like “dishonest acts.”

When banks report customers for any of these, NIBSS will host and secure the database of offending BVNs.

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CBN Says OPay, Moniepoint, Others can Start Onboarding New Customers Soon



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Central Bank of Nigeria (CBN) has said that mobile money operators including fintech firms like OPay, Palmpay, Kuda Bank, and Moniepoint will resume the enrolment of new customers “in another couple of months”.

CBN Says OPay, Moniepoint, Others can Start Onboarding New Customers Soon

Olayemi Cardoso, governor, stated this on Tuesday at the 295th Monetary Policy Committee (MPC) of the apex bank in Abuja when the MPC jacked up interest rate from 24.75 per cent to 26. 25 per cent.

Cardoso, said the apex bank has engaged many of the players on the need to strengthen their operations.

He said to block money laundering and illicit flows, the apex bank brought up “remedial measures that will help that sector to tighten up on onboarding and even existing clientele base”.

“I am confident that as time goes on, and hopefully in another couple of months, all these will be something of the past and then you will see that sector going back into what they’ve been known to do before, but certainly with a very stronger regulatory framework,” he said.

In April, the apex bank stopped fintech companies from onboarding new customers, a move that has been seen as a clampdown on the financial sub-sector by the Cardoso-led CBN.

When asked why the apex bank took the decision, the CBN chief said reports that the CBN has decided to clamp down on fintech firms are “furthest from the truth”.

He said “the fintechs have not been singled out for any exceptional kind of treatment”, adding that the CBN remained proud of the exploits of fintech firms in the last number of year and the apex bank would continue to support and strengthen them.

“However, regulation is very critical in a sector that seems to have grown so incredibly rapidly,” Cardoso said, citing illicit flows within the sub-sector.

“More recently, we had course to take a deep dive look at the whole issue of illicit flows and money laundering particularly within the non-heavy regulated banking system and we all know some of the issues that came out with cryptos and some of the messages we put out after that, which of course, gave us some course to know that there is the need for heightened surveillance.”

He said the apex bank has had major handshake with security agencies to identify the places to tighten regulations and surveillance in the sub-sector.

Cardoso said, “For that reason, we were concerned with respect to how we saw the issue of anti-money laundering and illicit flows as they made their way within the various sub-sectors of the financial industry and we felt there was a need for us to take a breather and work with different players to strengthen regulations, not by any means to throw them out of business.

“Let me re-emphasise that as at this point in time, we have not revoked the licenses of any of the fintech organisations.”

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Flutterwave Refutes N11Bn Loss Due to Security Breach



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Flutterwave, African fintech company, has debunked allegations in the media that it lost N11 billion ($7.25 million) due to a security compromise.

Flutterwave Refutes N11Bn Loss Due to Security Breach

Flutterwave, led by Olugbenga Agboola, Nigerian tech millionaire has rejected accusations is the only Africa-focused Company to make CNBC’s 2024 Disruptor 50 List

In response to the avalanche of claims, Flutterwave said that it discovered suspicious activity on one of its customer platforms in April 2024. The corporation maintains that it aggressively prevented any loss of customer monies.

As a security precaution, Flutterwave will contact select customers to move their accounts and recommends that all customers implement multifactor authentication, 3D security, and IP whitelisting.

This recent incident raises security worries for the corporation, which accepts payments in over 30 currencies from 40 countries.

In March 2023, reports arose saying hackers stole N2.9 billion ($6.3 million) from Flutterwave. The corporation quickly rejected the charges, reaffirming its commitment to client fund protection.

Flutterwave was ordered by a Nigerian court to recover N19 billion ($12.5 million) for unlawful POS transactions that affected 6,000 accounts across 35 banks and financial institutions.

This came after a months-long inquiry into a technical malfunction that enabled the fraudulent transfers.

Agboola founded Flutterwave in 2016, and it has since been a forerunner in Africa’s ongoing payments revolution. The company, with headquarters in San Francisco and

Lagos, is a notable success story in the continent’s developing fintech sector.

Flutterwave entered the Rwandan and Egyptian markets in 2023, which was a golden year for expansion. It formed a strategic relationship with IndusInd Bank Ltd., a top Indian financial services provider.

The corporation announced a $50 million investment in the Kenyan market to secure an operating license.

These results highlight Flutterwave’s twin goals of transforming Africa’s payments ecosystem and developing a foothold in international markets.

In 2023, Flutterwave formed a strategic relationship with Microsoft, founded by Bill Gates and Paul Allen, American billionaires.

This effort intends to empower at least 10 million small and medium-sized firms (SMEs) across Africa, with a concentration on Nigeria.

The partnership harnesses the power of the fintech sector to boost economic growth and improve people’s lives by promoting financial inclusion.

This collaboration expands on the two companies’ current technological arrangement, which was signed earlier in 2023.

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CBN raises interest rate to 26.25%



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Monetary policy committee of the Central Bank of Nigeria (CBN) has raised the monetary policy rate (MPR), which benchmarks interest rates, from 24.75 percent to 26.25 percent.

This comes after Nigeria’s inflation rate rose to 33.69 percent amid the surge in food prices.

Olayemi Cardoso, CBN’s governor, announced the monetary policy rate adjustment at a news conference on Tuesday, May 21, during the committee’s 295th meeting in Abuja.

The monetary policy rate (MPR) is the baseline interest rate in an economy, which banks use to set their interest rates.

This is the third consecutive time the apex bank will be raising the benchmark rate this year. At the March MPC meeting, the benchmark rate had been increased by 200 basis points from 22.75 per cent to 24.75 per cent.

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