Online loan outfits and CBN’s war on digital fraud


By Nasir Dambatta

“There are three things in the world that deserve no pity: hypocrisy, fraud and tyranny” -Frederick William Robertson.

Digital lending apps are an ongoing problem in Nigeria today and of growing concern to monetary policymakers at the Central Bank of Nigeria, CBN, and other relevant agencies including the Crimes Commission economic and financial, EFCC, and independent and other corrupt practices. Related Offenses Commission, CIPC. It is no longer news that unresolved privacy issues are common with digital lending companies operating in Nigeria today. What is new, however, is the new effort to find a holistic solution to this variant of cybercrime which is having disastrous consequences on the stability of the Nigerian financial system.

The National Information Technology Development Agency (NITDA) recently said it had received 40 petitions from Nigerians about companies misusing user data. The reports also revealed that the agency has begun to follow up on these complaints. In August, NITDA imposed a 10 million naira (about $24,000) fine on Soko Lending Company, owner of Sokoloan, an app that appeared in September 2018 with more than one million downloads on the Google Play Store. Although a few days ago the app appears to have been taken down, it illustrates the economic dilemma that Nigerians have suffered at the hands of Fintech Sharks.

As usual, the CBN sprang into action and to make the efforts of the apex bank both effective and efficient, it joined forces with the institutions concerned to form a kind of formidable squad.

The National Data Protection Bureau (NDPB) was the first to reveal that it was working with the apex bank, ICPC, EFCC, Nigerian Communications Commission (NCC) among others to investigate the activities online financial lending companies. Across sectors, vulnerable Nigerians are being defrauded through apps run by fictitious investors the majority of whom are never licensed by the CBN.

What is the purpose of the investigation initiated by the CBN and other relevant institutions? The investigation aims to find out how they operate, the variant of technology they use, and design a holistic way to tackle this Fintech Sharks industry.

The National Commissioner and Managing Director of the NDPB, Mr. Vincent Olatunji, said this while answering questions from journalists during a forum organized by the office in partnership with the NCC recently in Abuja. He also complained bitterly that many online lending app operators do not have forwarding addresses, making it difficult for the agency to track them.

However, he pointed out: “For every crime committed online, there is someone behind it and this guy has a digital identity. We now have a robust digital database under NIMC”.

Beyond the NIMC database, what else does this agency have that can be helpful in the fight? Olatunji revealed that the NDPB has engaged more than 50 public and private institutions to protect the privacy and data security of Nigerians. Additionally, it has been reported that the agency hopes to create more than 500,000 jobs in the data protection ecosystem, which will go a long way in reducing the high unemployment rate in the country.

The aim of this war against the Fintech Sharks is to ensure that the laws are aligned with the global trend, especially with the Data Protection Bill that has been sent to the Federal Executive Council (FEC) for deliberation. The bill is expected to be sent to the National Assembly as an executive bill, if it eventually wins FEC approval.

The objective is simple: to ensure that the bill is enacted before the end of President Muhammadu Buhari’s era. Essentially, data protection and security are tied to the nation’s reputation.

Another report summed up the essence of the vicious war against digital loan fraud thus: “We cannot overstate the importance of compliance due to vulnerabilities in the digital space. We are currently conducting investigations at scale on alleged breaches in the telecommunications, banking and gaming sectors and we can report that appropriate corrective action has been taken.

The CBN and other relevant institutions would work with the police investigation unit for prompt action in some of the identified cases involving fictitious data controllers.

The gist of the latest action involving the CBN and its partners in government agencies dealing strictly with financial crimes, is that Fintech Sharks may eventually be brought to justice and punished. This will be major proof that no digital loan equipment can test the will of the government again.

What has troubled CBN’s management is the latest wave of loan applications, with a new one practically appearing on YouTube ads every two weeks.
More concerning to analysts about fintech sharks, media reports across the African continent have confirmed that some of these digital loan companies have become notorious for threatening users with reputational damage in order to get them to repay. their loans. Samplers? They are many, but we can take at least one or two examples.

A report published a few weeks ago by Quartz Africa Weekly reads in part: “In one case, a debt officer for iMoney, an app that has been downloaded over a million times on the Play Store, sent this to a debtor: “I will send your names to all your contacts and destroy you if you want me to lose my job since you will not pay on time. Quartz Africa Weekly continued: “In another case of a borrower who was a week late on a payment of N100,000 ($240), sokoloan allegedly sent messages to his contacts describing him as a ‘chronic debtor and a fraudster”.

The report then concludes: “With Nigeria also promising a crackdown, African regulators appear to be signaling a new era for the still-emerging digital lending landscape: an era where startups are prevented from downgrading a welcome innovation that has eased access to credit. to a situation where loan sharks go to extreme lengths to intimidate borrowers”.

Digital lending businesses in Nigeria, especially unlicensed ones, which are in the majority, pose a high risk of damaging Nigeria’s national and international image, but for the current onslaught of CBN, ICPC, EFCC, NCC and a host others. The sophistication of the emerging army of “investors” in dodgy digital lending services definitely requires a collective expert effort.

As a hydra-headed monster, efforts to clip its wings or annihilate its sphere of influence in the nation’s economic space are beyond the use of a single public service institution. It is therefore inspiring that the CBN, EFCC, ICPC, NCC and others have decided to team up to fight this cancer, which has had a chilling effect on the economic superstructure of the country.

A recent investigation by BusinessDay newspaper into another variant of the Fintech Sharks operation revealed thus:

“More than six high-profile electronic bank fraud cases took place in Nigeria between February and July this year. Among these was the unsuccessful attempt on the account of a federal government parastatal domiciled in one of the first generation banks in which over 1 billion naira were transferred to various accounts in different banks in the country.

The report quotes some “repentant bank hackers” saying that such an attempt against the federal government’s parastatal failed “because the transfers were made on the NEFT platform and it takes 24 hours to be cleared on this platform. So it was detected before the money could be cleared.

At a recent conference in Lagos on the success of e-naira and related developments, the Guardian newspaper quoted CBN Governor Dr. Godwin Emefiele as admitting that “the penetration of digital technology has ushered in new dimensions of risk, including sophisticated digital fraud and cybercrime. ”

He said: “He (Emefiele) listed national and cross-border safety and security measures, digital identification, anti-money laundering standards and cybersecurity as measures taken to build operational resilience and ensure the security of the financial system.

Clearly, this new but vigorous offensive against fintech sharks, with CBN at the center, is a historic move that will add to the long list of CBN’s interventionist approach to some of our most debilitating national economic diseases. The apex bank has made almost similar efforts in the recent past which have succeeded, including rescuing the energy and aviation sectors; electricity sector; Small and medium-sized enterprises (SMEs); Farmers; health care facilities; education sector, among others.

If there is one thing for which the CBN led by Emefiele must never be forgotten, it is multiple innovative interventions in all sectors to cushion the effects of general difficulties, thanks to a massive empowerment unprecedented in the history of the apex bank. Ordinarily, the subtlety of any policy is to have an impact that can be touched and felt.

Dambatta, a veteran journalist based in Kaduna, writes via [email protected]


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