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Interswitch System Glitch:  Court Orders Freezing of Accounts in 54 Banks

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Justice Peter Lifu (JP) of a Federal High Court sitting in Lagos has granted an order freezing some accounts in about 54 financial institutions in the country where alleged funds from Interswitch accounts were moved to various accounts domiciled in the named banks.

Interswitch System Glitch:  Court Orders Freezing of Accounts in 54 Banks

Some of the banks affected by the freezing order are Access Bank PLC, GTBank PLC, First Bank of Nigeria, Fidelity Bank PLC, Globus Bank, Providus Bank, Keystone Bank, FCMB, Sterling Bank, SunTrust Bank, Ecobank, among other financial institutions in the country.

The freezing order was sequel to an ex-parte application filed by Mr E.A Okorie, counsel to Interswitch Nigeria Limited, seeking the order of court directing the banks and other financial institutions to freeze, place a lien or post no debit on some accounts domiciled in these institutions.

The plaintiff, Interswitch, is seeking the freezing order so as to prevent the dissipation of a huge amount of money that was illegally moved from its account into various accounts in the different financial institutions due to a glitch in its server.

In particular, the applicant is seeking the order of the court freezing the accounts of EARTHOLEUM NETWORKS LIMITED to the extent of the sums illegally received following the system glitch in the Plaintiffs server into the accounts of the 8th defendant, EARTHOLEUM NETWORKS LIMITED.

The plaintiff prayed the court for an order of Interim Mareva Injunction mandating all the defendants to comply with the Central Bank Guidelines No. BPS/DIR/GEN/CIR/02/004 of 2015 and the Central Bank of Nigeria’s Regulatory Framework for Banking Verification (BVN) Operations and Watchlist for the Nigerian Banking Industry, October 2017 by blocking, freezing, placing a lien and/or placing a “Post No Debit” restriction on the affected accounts domiciled with the aforementioned banks and other financial institutions pending the determination of the substantive suit.

Interswitch Nigeria Limited further sought for an order of interim mareva injunction mandating the respondents to Freeze, place a Lien and Post No Debit on any and all accounts belonging to and in the name of the 8th Defendant EARTHOLEUM NETWORKS LIMITED to the extent of the sums illegally received (following the system glitch in the Plaintiffs server) into the said accounts pending the hearing of the substantive application.

The plaintiff also asked the court for an order directing the defendants to disclose on oath to the court within 7 days of service of the order of court, the amounts standing in credit in the respective accounts of the 1st to 54th Defendants’ customers accounts domiciled with them from 19th of October 2023 to date.

AN ORDER directing the respondents to disclose on cath to this honourable Court within 7 days of service of the order of court, the details of the amounts standing as credit balance in the respective beneficiaries accounts of the 1st, 9th, 12th, 13th, 14th, 41st and 48th defendants’ customers/Account holders listed in a document marked EXHIBIT C attached herewith and domiciled with the 1st, 9th, 12th, 13th, 14th, 41st and 48th defendants from the 9th of May 2022 to date.

After listening to tE. A. Okorie, the plaintiff counsel, Justice Peter Lifu (JP), trial Judge, granted an order mandating the defendants to comply with the Central Bank Guidelines No. BPS/DIR/GEN/CIR/02/004 of 2015 and the Central Bank of Nigeria’s Regulatory Framework for Banking Verification (BVN) Operations and Watchlist for the Nigerian Banking Industry, October 2017 by blocking, freezing, placing a lien and/or placing a “Post No Debit” restriction on the affected accounts aforesaid to the extent of the sums illegally received (following the system glitch in the Plaintiffs server) into the respective Bank accounts of several customers who are listed in a document attached to the court papers marked ‘ Exhibits A’ pending the determination of the substantive suit.

The defendants in the suit are:

ACCESS BANK PLC, BAINES CREDIT MICROFINANCE BANK LTD, BANK OF INDUSTRY, BLURIDGE MICROFINANCE BANK, BRANCH INTERNATIONAL FINANCIAL SERVICE, CREDIT DIRECT LIMITED, ECOBANK PLC, EARTHOLFUM NETWORKS, FAIRMONEY MICROFINANCE BANK, FEWCHORE FINANCE COMPANY LTD, FIDELITY BANK PLC, FIRST CITY MONUMENT BANK PLC, FIRST BANK OF NIGERIA LIMITED, GLOBUS BANK PLC, GUARANTY TRUST BANK PLC, HASAL MICROFINANCE BANK LTD, HERITAGE BANK PLC, INFINITY TRUST MORTGAGE, IZON MICROFINANCE BANK LTD, JAIZ BANK PLC, KEYSTONE BANK PLC,

 

KUDA MICROFINANCE BANK LTD, DE -L.A FAYETTEE MICROFINANCE BANK LTD , L APO MICROFINANCE BANK, LINKS MICROFINANCE BANK, LOTUS BANK PLC, MIM FINANCE COMPANY LTD, NEW EDGE FINANCE, NIGERIAN NAVY MICROFINANCE BANK, NIRSAL MICROFINANCE BANK, OPAY DIGITAL SERVICES, PAGATECH LIMITED, PALMPAY LIMITED, PARALIEX BANK PLC, POLARIS BANK PLC, PROVIDES BANK PLC, Ceremony MICROFINANCE BANK LIMITED, ROLFZ MICROFINANCE BANK LIMITED, SMART CASH PAYMENT SERVICES BANK LIMITED, SPARKLE MICROFINANCE BANK LIMITED, STANBIC IBTC BANK PLC, STANDARD CHARTERED BANK PLC, STERLING BANK PLC, SUNTRUST BANK PLC, TAJ BANK LIMITED, TANGERINE MONEY MICROFINANCE BANK, TOL CHIGOLD MICROFINANCE BANK LTD, UNION BANK OF NIGERIA PLC, UNITED BANK FOR AFRICA PLC, UNITY BANK PLC , VALE FINANCE LIMITED , VFD MICROFINANCE BANK , WEMA BANK PLC and ZENITH BANK PLC.

 


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E-Financial

NGX Sanctions Julius Berger over ‘Insider Dealing’

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Nigerian Exchange (NGX) has sanctioned Julius Berger Nigeria (JBN) Plc for engaging in inappropriate insider dealing in shares.

NGX Sanctions Julius Berger over ‘Insider Dealing’

Insider dealing is the illegal practice of trading on the stock exchange to one’s own advantage through having access to confidential information.

Incorporated in 1970, Julius Berger Nigeria became a publicly quoted company in 1991 and has more than 10,000 shareholders.

NGX Regulatory Company (NGX RegCo), the self regulatory organisation (SRO) that regulates activities at the NGX, stated that JBN breached certain provisions of the listing rules and was thus sanctioned accordingly.

According to NGX RegCo, JBN violated provisions on “closed period”, in breach of the construction company’s commitment to adhere to listing rules and standards.

The NGX had tightened its rules and regulations to checkmate boardroom intrigues and block information arbitrage that tend to confer advantages on companies’ directors.

The amendments expanded the scope and authority of corporate financial reporting while eliminating gaps that allowed companies to sidetrack relevant rules in stage-managing corporate compliance.

The enhanced framework provided clarity and greater disclosures on directors’ trading in shares, corporate liability for accuracy and compliance of financial statement, dissuade bogus dividend payment and other sundry boardroom’s maneuverings that tend to favour insiders.

The amendments came on the heels of noticeable increase in violations of rules on ‘closed period’, a period when directors are banned from trading in the shares of their companies.

Rule 17.17 of the NGX disallows insiders and their connected persons from trading in the shares or bonds of their companies during the ‘closed period’ or any period during which trading is restricted.

This period is mostly at a period of sensitive material information, like prior knowledge of financials, dividends or major corporate changes, which places directors and other insiders at advantage above other general and retail investors.

A review of the disclosure violations at the stock market had shown that all violations in 2021 were related to violation of Rule 17.17 on ‘closed period’.

Under the amendments, in addition to the provisions of relevant accounting standards, laws, rules and requirements regarding preparation of financial statements, companies are now required to include several specific declarations on securities transactions by directors, changes in shareholding structure, self-assessment on compliance with corporate governance standards and internal code for directors on securities transactions among others.

According to the rules, in relation to securities transactions by directors, a company shall disclose in its quarterly financial statements, full year audited financial statements, and in corporate governance report contained in its annual report whether the company has adopted a code of conduct regarding securities transactions by its directors on terms no less exacting than the required standard set out by the market.

The company is also required to disclose, having made specific enquiry of all directors, whether its directors have complied with, or whether there has been any non-compliance with, the required standard set out in the Exchange’s rules and in code of conduct regarding securities transactions by directors.

 

Cerdit: The Nation

 


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IMF says Rising Cyber Threats Pose Serious Concerns for Financial Stability

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The International Monetary Fund (IMF) has declared that cyberattacks have more than doubled since the pandemic. In a blog released during the week, it pointed out that while companies have historically suffered relatively modest direct losses from cyberattacks, some have experienced a much heavier toll.

Specifically, US credit reporting agency Equifax, for example, paid more than $1 billion in penalties after a major data breach in 2017 that affected about 150 million consumers.

“As we show in a chapter of the April 2024 Global Financial Stability Report, the risk of extreme losses from cyber incidents is increasing. Such losses could potentially cause funding problems for companies and even jeopardise their solvency.

“The size of these extreme losses has more than quadrupled since 2017 to $2.5 billion. And indirect losses like reputational damage or security upgrades are substantially higher.

“The financial sector is uniquely exposed to cyber risk. Financial firms—given the large amounts of sensitive data and transactions they handle—are often targeted by criminals seeking to steal money or disrupt economic activity. Attacks on financial firms account for nearly one-fifth of the total, of which banks are the most exposed,” IMF said.

According to the Bretton Woods institution, incidents in the financial sector could threaten financial and economic stability if they erode confidence in the financial system, disrupt critical services, or cause spillovers to other institutions. “For example, a severe incident at a financial institution could undermine trust and, in extreme cases, lead to market selloffs or runs on banks.

Although no significant “cyber runs” have occurred thus far, our analysis suggests modest and somewhat persistent deposit outflows have occurred at smaller US banks after a cyberattack.

“Cyber incidents that disrupt critical services like payment networks could also severely affect economic activity. For example, a December attack at the Central Bank of Lesotho disrupted the national payment system, preventing transactions by domestic banks.

“Another consideration is that financial firms increasingly rely on third-party IT service providers, and may do so even more with the emerging role of artificial intelligence.

“Such external providers can improve operational resilience, but also expose the financial industry to systemwide shocks. For example, a 2023 ransomware attack on a cloud IT service provider caused simultaneous outages at 60 US credit unions,” it added.

The Fund said with the global financial system facing significant and growing cyber risks from increasing digitalization and geopolitical tensions, policies and governance frameworks at firms must keep pace.

The global lender added that because private incentives may be insufficient to address cyber risks—for example, firms may not fully account for the systemwide effects of incidents—public intervention may be necessary.

However, according to an IMF survey of central banks and supervisory authorities, cybersecurity policy frameworks, especially in emerging market and developing economies, often remain insufficient. For example, only about half of countries surveyed had a national, financial sector-focused cybersecurity strategy or dedicated cybersecurity regulations.

To strengthen resilience in the financial sector, authorities should develop an adequate national cybersecurity strategy accompanied by effective regulation and supervisory capacity that should encompass: Periodically assessing the cybersecurity landscape and identifying potential systemic risks from interconnectedness and concentrations, including from third-party service providers.

Encouraging cyber “maturity” among financial sector firms, including board-level access to cybersecurity expertise, as supported by the chapter’s analysis which suggests that better cyber-related governance may reduce cyber risk.

Improving cyber hygiene of firms—that is, their online security and system health (such as antimalware and multifactor authentication)—and training and awareness.

Prioritising data reporting and collection of cyber incidents, and sharing information among financial sector participants to enhance their collective preparedness.

As attacks often emanate from outside a financial firm’s home country and proceeds can be routed across borders, international cooperation is imperative to address cyber risk successfully.

It stressed that while cyber incidents will occur, the financial sector needed the capacity to deliver critical business services during these disruptions.

To this end, financial firms should develop, and test, response and recovery procedures and national authorities should have effective response protocols and crisis management frameworks in place.

It also hinted that IMF actively helped member countries strengthen their cybersecurity frameworks through policy advice, for example as part of the Financial Sector Assessment Programme, and through capacity-building activities.


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Financial Firms Lost $2.5Bn To Cyberattacks in 4 Years – IMF

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Financial firms have reported significant direct losses, totaling almost $12 billion since 2004 and $2.5 billion since 2020, the International Monetary Fund (IMF) has disclosed.

Financial Firms Lost $2.5Bn To Cyberattacks in 4 Years – IMF

In its April 2024 Global Financial Stability Report released recently, IMF stated that attacks on financial firms account for nearly one-fifth of the total, of which banks are the most exposed.

The IMF offered JPMorgan Chase as an example, stating that the biggest US bank recently reported 45 billion cyber events each day, with $15 billion spent annually on technology and 62,000 employees, many of whom were devoted to cybersecurity.

It went on to say that cyber events constitute a major operational risk that might jeopardise the operational stability of financial institutions and negatively impact macrofinancial stability as a whole.

“Financial institutions in advanced economies, particularly in the United States, have been more exposed to cyber incidents than firms in emerging markets and developing economies. Given the large amounts of sensitive data and transactions they handle, are often targeted by criminals seeking to steal money or disrupt economic activity.

“Attacks on financial firms account for nearly one-fifth of the total, of which banks are the most exposed. Incidents in the financial sector could threaten financial and economic stability if they erode confidence in the financial system, disrupt critical services, or cause spillovers to other institutions.

“Cyber incidents that disrupt critical services like payment networks could also severely affect economic activity. For example, a December attack at the Central Bank of Lesotho disrupted the

The IMF observed that a variety of reasons are involved in the increase in cyber incidents, which include the COVID-19 pandemic, which accelerated the fast expanding digital connectivity as well as the growing reliance on technology and financial innovation. Also, given the spike in cyberattacks following Russia’s invasion of Ukraine in February 2022, geopolitical tensions might also be a cause.

“A cyber incident at a financial institution or a country’s critical infrastructure could generate macro-financial stability risks through three key channels: loss of confidence, lack of substitutes for the services rendered, and interconnectedness. While cyber incidents thus far have not been systemic, ongoing rapid digital transformation and technological innovation such as artificial intelligence and heightened global geopolitical tensions exacerbate the risk.

“Recent significant cyber incidents—such as the ransomware attack on the US arm of China’s largest bank, the Industrial and Commercial Bank of China, on November 8, 2023, which temporarily disrupted trades in the US Treasury market—further underscore that cyber incidents at major financial institutions could threaten financial stability,” it said.

To strengthen resilience in the financial sector, the IMF, suggested that central banks and authorities must create a sufficient national cybersecurity strategy and implement efficient regulation and supervisory measures, which should include: regular evaluation of the state of cybersecurity and detection of possible systemic vulnerabilities resulting from concentrations and interconnections, including those arising from third-party service providers; improved cyber-related governance to lower cyber risk and supports the idea of promoting cyber “maturity” among financial sector companies, including board-level access to cybersecurity knowledge, among others.

 


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