Nigeria’s Central Bank has instructed the Nigeria Inter-Bank Settlement System (NIBSS) to debit the settlement accounts of commercial banks that receive fraudulent proceeds, effective January 2025.
This move aims to curb fraud in the financial services sector and hold banks and fintechs accountable for lapses in their transaction monitoring systems.
Banks that fail to properly vet incoming transactions or detect fraudulent activity will face instant debits once the activity is reported. This directive encourages financial institutions to improve their Know Your Customer (KYC) and due diligence practices, critical areas for safeguarding Nigeria’s financial ecosystem.
The new rule has been unofficially in effect since December 2024, when a major bank lost ₦7 billion to fraud. NIBSS reportedly debited the settlement accounts of the fintech that received some of the proceeds without explanation.
Nigerian banks lost ₦42.6 billion to fraud in Q2 2024, with most financial institutions avoiding reporting fraud incidents due to fear of reputational harm. The new directive is expected to generate significant changes within Nigeria’s financial sector, with commercial banks likely to implement more rigorous controls on transactions.
