THE LAW & E-FRAUD IN NIGERIA.

Adedapomola G. Lawal, Esq

INTRODUCTION:

In the state where I practice law, it has become a routine that everyday there must be at least 10 people at the court to get orders for reversal of funds which were fraudulently transferred from their account to other accounts in the same or other banks.

The story is usually the same, upon presenting the orders to the bank, there will be no money in the account to satisfy the amount in the order.

Anytime I happen to be in court when these people come for the order, I usually ask the same question which is "Hope your bank has contacted the beneficiary bank so that they can lien the account?" And the answer is usually NO. WHY? I ask. Then they say, "we are required to come with a court order before our bank can do that." And I will be like 😲. 

In my jurisdiction, when you are defrauded in this way, you can say goodbye to your money. Sadly, before you can get the order for reversal your money will be gone.🙁

This made me curious to want to expose both bank staff and account holders and the general public to the process which by law the Central Bank of Nigeria has put in place to curb issues of electronic fraud in Nigeria.😄

WHAT IS E-FRAUD:

According to the FBI, E-Fraud which is also known as internet fraud is the use of Internet services or software with Internet access to defraud victims or to otherwise take advantage of them.

According to Macmillan Dictionary, internet fraud is the activity  of  obtaining money illegally using the internet.

The gist of what internet fraud is, is clear. Probably, some of us have been victims of internet fraud on our bank accounts.

Internet fraud happens when someone transfer money from your account without your authorization. Simply put.

WHAT E-FRAUD IS NOT:

E-Fraud is not "wrong transfer due to bank error". This is a situation where the bank erroneously sends money contrary to customer's instructions due to wrong account number, wrong amount, duplication, etc to another bank.

This situation has been addressed by the CBN in the "Regulation on Instant (Inter-Bank) Electronic Funds Transfer Services in Nigeria" of 13th September 2018. 

This is not our focus in this program. You can read it up for further understanding🤓.

LEGAL PROTECTION AGAINST E-FRAUD:

So as to reduce the success of E-Fraudsters in Nigeria, the CBN established the Nigeria Electronic Fraud Forum (NEFF) to proffer solutions towards addressing frauds arising from the increased adoption of electronic payments. 

It was this effort that led the CBN to direct all Deposit Money Banks (DMOs), Mobile Money Operators (MMOs), Switches and all payments service providers to establish a Fraud Desk in their respective organisations via its circular titled "Establishment of Industry Fraud Desks" dated 11th June, 2015.

The question any legally minded person should ask is if this circular is enforceable. To which I will answer in the affirmative, yes. Circulars issues by the CBN to financial institutions in Nigeria have the force of law just as the Practice Directions issued by the heads of Courts have the force of law. CBN is a creation of statute or law "Central Bank of Nigeria Act, 2007 (as amended)" and by that Act it has power to regulate the banking industry in Nigeria. Therefore, failure to comply with its directives are sanctionable as they create rights and duties.

Having said that, it is important to consider the provisions of the CBN directives in respect of E-Fraud. 

According to the CBN directives, it is the responsibility of all DMBs, MMOs, Switches and all payments service providers to maintain a dedicated Fraud Desk appropriately staffed with personnel that have requisite training on emerging fraud trends on various electronic payment channels.

DUTIES OF THE FRAUD DESK

The desk shall, at a minimum, offer the following services:

1. Provide support to customers on electronic frauds with a minimum of 10 dedicated phone lines, manned and available to customers at all times;

This is basically for financial institutions. They MUST have a MINIMUM of 10 phone lines which is known to their customers and which when called by their customers can be answered immediately. Money matters are urgent. It is not a good thing for a customer to be helpless when his money is being wired away from his account. Hold your bank responsible here.

2. Make available the option for calls to contact centre, in respect of fraud alerts or complaints to be redirected to fraud desk;

Though the financial institutions must fulfill No. 1 above, the customers must not of necessity directly contact the fraud desk phone numbers in fraud cases. A call to the general phone numbers of the banks will suffice. It is the duty and/or responsibility of the bank to redirect the complaints to the fraud desk.

3. Block and/or Place No Debit restrictions on accounts upon receipt of fraud complaints;

IMMEDIATELY a fraud complaint is received either by phone call, short codes or email from a customer, the bank must block and/or place no debit (PND) restrictions on accounts. This responsibility is for the banks to which the money is being deposited for onward withdrawal usually at POS points. 

The problem is usually at this stage. In my jurisdiction, banks insist on seeing court orders before they can either lien an account of a fraudulent beneficiary or to reverse the stolen money. This is obviously not correct. 

The reason for this provision is so that the amount alleged to have been stolen should be liened pending the resolution of complaint of fraud on the account.

NOTE that this provision did not say the money should be immediately reversed to the complainant. The beneficiary must also be heard. See Clause 10.1 of the Regulation on Instant (Inter-Bank) Electronic Funds Transfer Services in Nigeria.

If at this point the bank is slack, the victim can loss his/her money to the e-fraudsters. 

4. Receive customers' stop-transaction instructions to block their accounts through short codes service provided to customers by the banks;

This responsibility is for the victims bank. I am aware that a short code now exist through which customers can block their accounts at their banks: *966*911#

5. Log all customer fraud alert and/or complain and escalate in line with internally predefined escalation path;

6. Submit reports to the Nigeria Inter-Bank Settlement System (NIBSS) Plc on fraud information logged by the fraud desk;

7. Honour "hold" instructions from NIBSS with respect to fraud matters and grant NIBSS permission to view details on logged transactions;

The NIBSS is the supervisory authority in fraud related issues over financial institutions subject to the CBN. The banks must log fraud complaint and submit reports to the NIBSS on fruad matters. It is the NIBSS that has the final say in E-Fraud related matters in the banking industry. Thus, it is NIBSS that can direct the financial institutions to "hold" a transaction i.e not to allow the transaction to be successful. This is not an excuse for banks not to comply with the provision to lien an account on the complaint of a customer that they have been defrauded. In fact, the CBN circular for the Establishment of Industry Fraud Desk further provides that "1. All interbank transactions on all e-channels shall be passed through the central anti-fraud solution in NIBSS". By this provisions, it is safe to assume that all interbank transactions on all e-channels pass through the central anti-trade solution in NIBSS. If it is otherwise, it is the fault of the financial institution. It is therefore safe for the banks that IMMEDIATELY on the complaint of fraud by a customer or a victim, the account of the fraudulent beneficiaries should be liened pending the resolution of the complaint.

8. Sensitise customers on E-Fraud and Fraud Desk services;

9. Manage/Resolve all intra-bank fraud issues leveraging an enterprise fraud management system and

10. Maintain a mail group mapped to members of the fraud desk team:

DUTIES ON VICTIMS OF E-FRAUD

1. To subscribe to transaction alerts preferably sms or both sms and email. This will enable the victim to know immediately money is being moved from his/her account. If the bank fails to give the victim a prompt alert, it is actionable in law as tort of negligence on the part of the bank.

2. To immediately complain to the bank when they receive unauthorized debit alert(s). Equity aid the vigilant and not the indolent. Equity does not pour water where there is no fire. He who comes to equity must come with clean hands. If you wait for too long before making complaint to your bank or the beneficiary bank (if you can), you have slept on your right. Allow the sleeping dog to lie. You have shown that the money is not important to you. You many never find it. Therefore, immediately you receive the first alert CONTACT YOUR BANK or DIAL THE SHORT CODE to block your account.

HOW TO GET BACK YOUR MONEY WHEN YOU BECOME A VICTIM OF E-FRAUD

1. The first things to do is not to rush to the bank. You will not have any evidence that you PROMPTLY complained to the bank. Immediately to receive the first alert, dial the short code and block your account.

2. Send an email to your bank's email address providing details about the unauthorized transaction(s). The email should contain your account name and number, the date the the transaction was done and the time you received the alert. It therefore means that you must have your bank's email address on your phone. 

At this stage, ask your bank to ensure that your account is really blocked and demand that your bank's fraud desk liaise with the fraud desk of the beneficiary bank so that the beneficiary bank can lien the amount stolen from your account in their bank in the account of the fraudulent beneficiary.

3. Then send a follow up message to your bank and copy the CBN and NIBSS stating the same thing as contained in No. 2 above. This should put the affected bank on it toes. 

Where No. 2 and No. 3 are effectively and promptly done, then you would have pinned your money in the account of the fraudster. 

4. Visit your bank to have the situation resolved. 

According to Regulation 1.10 of the Regulatory Framework for Bank Verification Number (BVN) Operations and Watch-List for the Nigerian Financial System, in the event of complaints by a bank customer, disputes shall be resolved by banks or escalate to the CBN when unable to resolve. 

Ordinarily, there is no need for a victim of E-FRAUD to obtain a court order before his money should be reversed to his account. The duty of resolving disputes like this is that of the banks. 

5. If there is no money in the fraudster's account, the next step is to locate the fraudster and watch-list him. 

The CBN has made a Regulatory Framework for Bank Verification Number (BVN) Operations and Watch-List for the Nigerian Financial System on 18th October, 2017 to address the increasing incidence of frauds with a view to engineering public confidence in the banking industry.

The BVN gives a unique identity across the banking industry to each customer of Nigerian banks.

From February 2014, no account can be opened in Nigeria without a BVN. By liaising with the bank of the beneficiary of the fraud, the victims bank can locate other accounts operated by the fraudster. The introduction of the BVN is part of the overall strategy of ensuring effectiveness of the Know Your Customer (KYC) principles. 

Thus, it is unlawful for a customer to succeed in using an account to commit a fraud. Not in this age.

The task of locating a fraudulent and watch-listing him is that of the bank where he carried out the fraud from. This is because that bank has his BVN and the bank must exonerate itself as not being a collaborator with e-fraudsters or an heaven for electronic fraud. Otherwise, it is safe to assume that that bank is screening the fraudsters.

Regulation 1.6 of the Regulatory Framework for Bank Verification Number (BVN) Operations and Watch-List for the Nigerian Financial System on 18th October, 2017 (as amended on July 4th, 2018 itemized the entities who may have access to BVN information AFTER PROVIDING A VALID COURT ORDER subject to the approval of the CBN.

Thus, it is ONLY at this stage that a victim needs to get a court order. Not to have his money reversed but to assist the bank in getting the BVN information of a fraudster and to watch-list him.

IMPLICATIONS OF BEING ON THE WATCH-LIST

1. The fraudster can no longer open new accounts or operate his existing accounts.

2. The fraudster cannot use e-channels such ATM, POS, Internet Banking, Mobile Banking, including issuance of third-party cheques.

3. The fraudster cannot provide reference to another customer, neither can he be allowed access to credit facility or guarantee credit facilities.

4. Penalties that applied to watch-list customers shall apply to all accounts that he or she is a signatory to whether they are personal or corporate accounts.

PENALTIES FOR OFFENDERS ON THE WATCH-LIST

1. Confirmed successful fraud with monetary value: He will suffer the implications for a period of 10 years.

2. When a customer is watch-listed more than once: He will suffer the implications for a period of 10 years and can only transact in the Branch of a bank where his account is domiciled or opened.

3. Individual who committed fraud and is at large: He will suffer the implications and a POST-NO-DEBIT flag will be placed on all accounts linked to his BVN.

It is actionable as a tort of negligence if a bank failed to do any thing that falls under its responsibilities as stated by the CBN.

In conclusion, do not waste time to act when you or someone close to you become a victim of electronic fraud. 

(c) Adedapomola G Lawal, Esq.