Dons Eze
HOW POOR REGULATION OF INSTANT PAYMENT SYSTEM FUELS CRIMINALITY IN NIGERIA
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‘”When they announced that we had been kidnapped, at first, I was just laughing. I was busy looking for a hidden camera because I thought it was a prank. You know, the usual pranks on social media,” Kemi Gbadamosi* recounted her ordeal at the hands of a criminal gang operating the “one chance” scheme and exploiting the weaknesses in Nigeria’s instant payment system.
Within one hour, she was beaten, sexually assaulted, and threatened with rape before her family paid a ransom of N2 million via a POS machine.
Ms Gbadamosi had left her house in the Gbagada area of Lagos State at around 5:30 a.m. on 10 October 2023. That morning, her major concern was to avoid the usual heavy traffic along the route to Lagos Island, where the bank she worked with is located. The events that followed left a scar and changed her forever. Her routine was simple: wake up before 5 a.m. and get to the bus stop before 6 a.m. Any deviation from that timetable could mean spending hours in traffic.
On that fateful day, she arrived at the bus stop on time, standing beside another lady.
She did her usual check when a Toyota Sienna vehicle pulled up beside her. The passengers inside were well-dressed and appeared to be in their mid-40s. Reassured, she and the other lady hopped in. She became more relaxed when the driver paid the agbero (park tout) at the bus stop. However, less than five minutes into the trip, one of the passengers announced to her, “This is a kidnap.”
“They were well-dressed and in their 40s. Immediately the car was on the move, they started attacking us. They announced that they were kidnappers.
“They asked me how much I had in my account. I told them, and they later asked me to start opening my bank accounts,” she said during a phone interview.
Drawing from her experience as a bank worker, she attempted to lock herself out of her mobile app by intentionally entering the wrong password. She knew that after three failed attempts, she would be locked out. Unfortunately for her, the kidnappers were familiar with the tactic. On the second attempt, the gang leader warned her, “If you try it again, we will rape you.”
“Because I was scared of being raped, I had no choice but to open all my mobile apps,” she stated, pausing periodically as she narrated.
That was not the only time they would threaten rape. They found the threat an effective strategy alongside beating.
When the money in her bank account was insufficient, she was asked to call her family to send more money. In the end, the kidnappers collected N2 million from her and another N2 million from the second victim.
Ms Gbadamosi is just one of the hundreds of people who have been victims of kidnapping for ransom or one chance, where the abductors used mobile money transfers with the authorities unable to trace them.
For this report exploring how criminals are exploiting the vulnerabilities in the country’s instant payment system, PREMIUM TIMES interviewed several other victims whose stories are similar.
All these happen despite the mandatory linking of all bank accounts in Nigeria to the Bank Verification Number (BVN), a unique 11-digit identifier that links a person’s financial accounts to their biometric data.
According to a recent report by the National Bureau of Statistics (NBS), N2.2 trillion was reportedly paid as ransom to kidnappers within 12 months.
The Crime Experience and Security Perception Survey (CESPS) estimated that the average ransom collected was N2.7 million. This worrisome report paints a grim picture that threatens Nigeria’s fast-developing instant payment system.
According to Premier Oiwoh, CEO and Managing Director of NIBSS, 10 billion mobile transactions were carried out in Nigeria in 2023.
Speaking at the launch of the 2024 SIPS (State of Inclusive Instant Payment Systems) report in Accra, Ghana, Mr Oiwoh stated that the country is expected to have about 12 billion transactions in 2024.
Mr Oiwoh’s image
Mr Oiwoh’s speaks about the growth in Nigeria’s instant payment system
Over the past couple of years, the instant payment system has grown exponentially in Nigeria. Experts traced this growth to the inclusion of fintech companies in the payment system. The redesign of the naira in 2022 and the attendant cash scarcity accelerated the adoption of mobile money. Even traders in markets now have POS machines.
However, enforcing regulatory compliance has been a major challenge in the sector, particularly on the part of Payment Service Providers who own the POS devices.
According to the 2024 report, this lack of regulatory compliance hinders the NIP system from achieving full maturity.
“As for how inclusivity is likely to evolve at the system level, NIP in Nigeria currently has the highest likelihood of reaching mature inclusivity in the future. It has integrated all use cases, including G2P and cross-border payments, the latter through integration with PAPSS.
“The only mature criteria it has not yet fulfilled involve providing additional recourse channels for end users who need to dispute a transaction. In fairness, recourse is a development area for all the other systems and is complex to implement, as it requires additional resources and monitoring,” the 2024 SIPS report reads.
Experts say enforcing compliance rules would help address the challenges. Stanley Jacob, an expert in the fintech sector, told PREMIUM TIMES that criminals can be tracked easily if banks or operators are made liable for providing information about their customers.
“It is not impossible to track the criminals. It is easier than a lot of us imagine. Banking is like a club. When you have a club, immediately you admit a bad player; the club is exposed to bad behaviour. As far as I am concerned, I think the Central Bank needs to do a lot more to protect the consumers.
“That also follows for any settlement, be it electronic or paper. The question is, if I transfer money to a bad player in a bank, then the bank should also be held liable if they are unable to produce the customer.
“The moment you admit them into the settlement system, they should also be subjected to the same stringent rules as other banks. They must be able to produce and present their customers. POS is just a device; the money is still being domiciled in a particular bank account,” he said during a phone interview.
Another expert, Babatunde Obrimah, said some criminals use gaming and cryptocurrency platforms to make it difficult to track their transactions.
To address the challenge, Mr Obrimah said there is a need for interoperability efforts involving telecom regulators and anti-graft agencies.
“The problem is that some money goes through gaming and cryptocurrency platforms. If money is moving from bank to bank, it is easy to track. This is why regulation is important. There has to be interoperability among the regulators. Some even use the money to buy airtime.
“There must be collaboration among telecom operators, NCC, the EFCC, NFIO, the Central Bank and the banks. There is a lot of conversation going on. However, collaboration among regulators is not easy,” he said.
Recent efforts by the CBN to curb criminal activities within instant payment system
Recently, the Central Bank of Nigeria (CBN) has tried to curb the activities of these criminals by issuing strict circulars to regulate the activities of POS operators in the country.
Last September, the CBN issued a new directive requiring all Payment Service Providers (PSPs) to integrate their transactions through a Payment Terminal Service Aggregator (PTSA) to streamline and track electronic transactions in the country.
PSPs are required to submit monthly returns to the CBN, detailing the number of merchants and agents they manage, their POS terminal deployment, and the volume of corresponding transactions.
The report is expected to reach the CBN no later than seven days after the end of each month.
The circular also warned that noncompliance within 30 days of issuance would result in appropriate sanctions.
A source at the central bank, who did not want his name mentioned because he is not permitted to speak to the media, said some of the bank’s actions are expected to yield results by 2025. He added that POS operators had in the past operated with impunity, but most now comply or risk sanctions.
Last month, the House of Representatives also took measures to address the problem following a motion moved by Idem Uyime.
In the motion, the lawmakers resolved that the CBN should shut down platforms used by the one-chance operators.
Pending when the results are seen, victims like Ms Gbadamosi have resorted to lifestyle changes or even discontinued using mobile banking as precautionary measures.
“One thing I learnt from the ordeal is that my account that has money inside, I don’t have a mobile app for it and I don’t even leave the SMS alert on my phone. I made some adjustments. It wised me up a bit. Even if I decided to have a mobile app, it would not be visible,” she said.
