Why Internet Fraud Is On The Increase In Nigeria

By Chiemezie Ugochukwu

Before internet services became readily available in Nigeria, financial transactions were mainly done physically over the counter in banking halls, and most businessmen and women moved around with large sums of money. The scenario offered an avenue for criminals to physically attack people who moved around with money, which sometimes resulted in the deaths of many Nigerians. During the era, most businessmen who were travelling from Onitsha (a big commercial town in Nigeria) to Lagos or any other part of the country to buy goods were attacked by gangs of criminals who carted away their money.

Interestingly, with the penetration of the internet in Nigeria starting from the early 2000s, Nigerian banks have been modifying their operations by adopting the internet for transactions. This development changed many banking operations in Nigeria, like transferring money, paying for services, and other transactions that made people carry large sums of money. Also, Nigeria has witnessed increased growth in internet services, and many Nigerians are using internet-enabled devices and smart phones. Financial institutions, especially the banks in Nigeria, are fully digitalized opening different platforms like Point of Service (POS), Automated Teller Machine (ATM), mobile banking, banking apps, and chatbots where Nigerians rely for transactions and interact with bank staff. These platforms have increased financial transactions in Nigeria, given that most people can engage in financial dealing from the comfort of their homes.

In a report by the Nigeria Inter-Bank Settlement System (NIBSS), the country recorded 600 trillion naria in e-payment transactions in 2023. This level of e-transactions shows that internet banking and online payments are thriving in Nigeria. Unfortunately, internet scammers are exploring the e-payment platforms to defraud people, creating fear and doubt among Nigerians about the safety of e-banking in the country. Unlike the era when criminals attacked people with guns and collected their money, internet scammers steal from people using various avenues and digital devices that enable e-fraud. It is believed that the use of e-channels for transactions has increased financial crime in Nigeria. Financial institutions in Nigeria lost 472 million naria in the first quarter of 2023, which indicates that internet scammers are stealing from people using various tactics. ATMs, POS, mobile banking, and other internet banking apps are the honeypots these criminals explore to steal from people.

ATM Debit Card Swapping Fraud

Given the availability of ATMs in Nigeria, scammers are engaging in debit card swaps to defraud people. Card swapping entails exchanging or changing a persons debit card details using skimmers and cameras that capture sensitive details of a card at an ATM. Although this method of stealing seems difficult, reports have shown that Nigerians are losing their money through it. According to BUSINESS DAY newspaper, a security agency in Kwara State detained a fraudster on July 6, 2023, after he switched out an elderly mans ATM card and made off with large sums of money.

Card swapping fraud is an emerging fraud technique because scammers look out for ATMs located at big markets and busy streets where there seem to be more transactions. In the eastern part of the country, the same newspaper informed the public about the activities of a group of scammers who are engaging in card swapping to defraud Nigerians. A staff member of Nnamdi Azikiwe University lost her money through card swapping fraud. Narrating her ordeal, she said she wanted to withdraw some money through an ATM machine at the university town. When she inserted her card, she noticed a glitch and requested help; unknown to her, a scammer posing as a security personnel of the bank asked her to input her pin and repeat the transaction. When she inputted her secret pin the card became trapped and couldnt perform further transactions, and the scammer informed her that she could get help in the banking hall. She, however, started receiving debits on her account while in the banking hall.

Similarly, the Economic and Financial Crimes Commission (EFCC), which primarily investigates financial and related crimes in the country, averred that card swapping is increasing daily and many people are losing their money through this fraudulent act. Some ATM points in Nigeria, especially in busy areas, are witnessing fraudsters who disguise themselves as bank officials in the pretence of helping banking customers who are not sure how to use their cards.

POS Fraud

Point-of-Sale (POS) fraud is endangering the growing e-transaction culture in the country. This platforms use in financial transactions is increasing as many Nigerians use it for making purchases, paying for electricity bills, and cable television subscriptions, among others. It serves as a mobile bank in rural areas where banks many not be present. According to the data website, Statista, POS payments in Nigeria were worth over 860 billion naria in 2022. It is a booming business for most young Nigerians, who charge a fee for using the POS to transact financially.

POS fraud is a major concern, as people are easily scammed using this electronic device. Financial experts believe that POS fraud is a major threat to e-commerce given that most businesses are adopting it for payment, and in rural areas, some commercial banks have agents who are registered to serve as mini banks to rural dwellers. It has been observed that some agents who work for financial institutions and offer financial services through the POS are engaging in e-fraud. The fraud is committed by installing a skimming device on the card reader of the POS to capture debit card details. The details will be used to make a purchase or withdrawal from the bank account of the victim. Many Nigerians have complained that after using POS, they receive notifications that their accounts have been emptied by scammers. Even a state government was shortchanged in 2023 by a leading POS company which services it enlisted for collecting revenues and taxes. Sadly, it was later discovered that the POS system was configured to remit less money to the government than had paid by the people.

E-fraud on Mobile Phones and Digital Devices.

The increasing use of digital devices, smart phones, and other gadgets is contributing to mobile and internet banking among Nigerians. In a report, the Nigerian Communication Commission (NCC) stated that active mobile phone users in Nigeria was 220,715,961 million as of August 2023. It implies that more people are using mobile devices for banking and financial services, thus exposing them to e-fraud. Scammers in Nigeria are deploying numerous means to defraud people of money using their mobile phones and digital devices. The techniques they adopt include identity theft, phishing scams, and fake websites.

Most Nigerians have experienced fake calls, fraudulent calls and text messages from scammers posing as bank staff and government agencies, among others, trying to trick them into sending their banking details including debit card information, bank verification number (BVN), token, and other sensitive information. In January 2024, a university professor revealed how he received a text message on his mobile phone that his bank account had been blocked for not having a BVN number. The message directed him to call a particular number to resolve the issue. The lecturer immediately called the customer care of the bank to ascertain if the message was from the bank, and he was notified that scammers were trying to gain access to his account.

Use of email for scams

Financial institutions are adopting email communication to reach out to customers and keep them updated on information that will enhance their banking experience. Also, customers’ financial statements are sent via email, thus making it a reliable means of handling their needs. Scammers also target this channel of communication by sending phishing emails to people pretending to be from banks or other financial institutions. Phishing emails mostly try to convince their victims to give out their personal information through a fake website and to click on a link that can make them win a holiday trip or enticing gifts. A commercial bank in Nigeria, Guaranty Trust Bank, issued a scam alert to their customers that fraudsters are sending emails to people to send their ATM personal identification numbers (PINs). Such emails are laced with words that can compel their victims to act fast based on certain fraudulent messages, like investment opportunities with a high return on investment, an urgent need for financial assistance, and fake employment or recruitment from a known organisation or government agency. There were 1.3 million phishing attempts on Nigerian banks and other financial institutions in the country in 2023, according to a study by Check Point Research. This is an indication that phishing scams are on the rise, and people should be careful of the emails they receive on their mobile devices.

The Use of bank Websites for Fraud

Scammers in Nigeria create websites and claim they are authentic, especially for banks and other financial institutions web addresses. Most times, these fake websites are tailored to look authentic to confuse people into divulging sensitive information. In recent times, this scamming technique has affected Nigerian banks by tricking people into believing they are on the right website. At some banks, like Union Bank, whose web address is www.unionbankng.com, scammers can create www.unionbank.com to defraud people. Also, Guaranty Trust Bank has urged Nigerians to only login to www.gtbank.com to ensure the confidentiality of transactions on their banking site. The Central Bank of Nigeria (CBN) has cautioned people that scammers have fake websites of the bank where they post documents to scam people.

Artificial Intelligence is aiding scammers.

Technology is advancing every facet of human activity, like education, health, finance, and security, among others. Artificial intelligence is a technology that performs human activities with precision, and innovations over the years are fast changing the operations of AI, which several people are using, including scammers. The emergence of AI has led to deepfake technology that scammers are deploying to scam people on different digital platforms. Given that most of the AI applications are easily accessed on smart phones and digital devices, it is believed that scammers are leveraging AI for password cracking and business email compromise (BEC). In password cracking, scammers use AI to crack passwords through three steps that include acoustic side attacks, brute force attacks, and dictionary attacks.

Acoustic Side Attack

In acoustic side attacks, scammers use AI applications to detect distinct sound patterns from keyboards because each button produces a unique sound on mobile phones or computers. This implies that an acoustic side attack enables fraudsters to use a sound that a system produces to steal vital information like passwords. Researchers believe that peoples sensitive information can be accessed with the aid of an AI algorithm that reveals such data. In addition, the attack is affecting banks because scammers, with the aid of AI applications, monitor their systems and compromise data, which could lead to monetary losses.

Brute Force Attack 

A brute force attack is a pattern that automates the guessing of a password until it successfully gains access to a system. It has been discovered that PassGAN AI has been deployed to gain access to passwords using the brute force attack technique. Also, the PassGAN AI uses a generative adversarial network (GAN) to independently learn the distribution of real passwords, which internet scammers are exploring to engage in password theft.

Dictionary Attack

A dictionary attack is another smart strategy that scammers are using to steal passwords from people and institutions. The attack employs the use of arranged words from the dictionary by using AI applications. These tactics also use dictionary words and intelligently use them until a password is broken. Similarly, AI applications aid dictionary attacks by automating the testing of large words and phrases that people use as passwords.

Business Email Compromise

The use of AI applications in business email compromise (BEC) is assisting scammers to write knowledgeable emails used for scamming people. AI like Chat Generative Pre-Training Transformer (GPT) has contributed to BEC fraud globally because it enables users to write whatever they want in a convincing manner, which lures people and organisations into revealing data that can be used for fraud. Also, the use of the AI app enables scammers to engage with their victims with fewer grammatical errors. The era of Prince of Nigeria email scams, which sent people poorly written emails, has ended thanks to ChatGPTs innovation. The advancement in technology will expose more people to BEC scams, especially in Nigeria, where people may not be able to distinguish a scam email.

Deepfake Technology

Deepfake is simply the superimposition of images, videos, and audio as true representations of a person, company, or government agency. Advancement in technology has improved deepfake technology so much that scammers are deploying it globally to engage in illicit activities. Given the increasing use of internet devices, digital devices, and smart phones in Nigeria, scammers are utilising social media platforms to create profiles and business pages to scam people. Most banks and financial institutions have a social media presence to interact with customers, but scammers create similar platforms to defraud people. The criminals most often clone existing social media accounts of banks and use them to defraud people. A civil servant in Owerri, Imo State, narrated how he wanted to inquire about his ATM debit card from a bank through the Facebook handle. The fake social media platform through the virtual assistant demanded sensitive details, and within a few hours, the civil servant account received notifications of several withdrawals.

Flamboyant Living of Internet Scammers

Generally, internet scammers or cybercriminals have a pattern of life that differentiates them from other members of the public. In Nigeria, it has been observed that most young people, especially university undergraduates, are living affluently without any identifiable source of income to match the lifestyle they exhibit to the public. In the streets, they can be identified by their mode of dressing, like sagging their trousers, coloured dreadlocks, designers clothes, shoes, and bags, and moving around with friends, especially young ladies. Most young ladies in higher institutions in Nigeria enjoy being friends with internet scammers who show off affluence and can take care of their financial needs.

Also, internet scammers display wealth by riding exotic cars to show they are living comfortably. Most times, they attend events like weddings or birthday parties in convoys of cars to flaunt their wealth. This tends to entice other young people who see them as living the best of life. It is for this reason that some universities in the Nigeria have banned students from bringing cars into the campus as part of celebration of the end of their final degree exams given the previous recurring instances where student scammers ride in convoys of expensive cars in the name of celebration.

In Nigeria, nightclubs are also a place where internet scammers flaunt their wealth. They spend heavily on expensive wines and have the VIP sections reserved for them. Reports have shown that these nightclubs are encouraging these criminals by organising shows they sponsor and giving them special recognition whenever they appear at the clubs.

Reducing financial e-fraud in Nigeria

The internet is driving change in numerous human activities, especially e-commerce and e-banking. The number of Nigerians using these platforms is increasing, and this calls for measures that will protect them while transacting financially on internet enabled devices. Experts in e-financial services are advocating for magnetic stripe cards that will ensure that debit cards are not tampered with while providing security for users of POS services. This debit card feature will drastically reduce the fraud that scammers are using to collect peoples money and encourage others who may be having doubts that transactions using their cards are protected.

Given the literacy level in Nigeria, financial institutions and government agencies should invest in enlightenment campaigns on increasing e-fraud and how to stay safe while engaging in financial transactions via the internet. This will highlight various tactics the scammers are using and how to detect and report them to authorities when faced with such a situation.

Also, the government at the state level should emulate the Lagos State government, which has finalised plans to register POS agents to protect residents in Lagos from POS fraud. The prevalent POS fraud in Nigeria is alarming, and this measure will identify agents and persons who engage in e-fraud through the POS and report them to the police for prosecution. This will serve as a deterrent to others who may want to engage in the fraud.

Chiemezie Ugochukwu is a doctoral researcher at the School of Law, History and Social Sciences, Bangor University, United Kingdom.