Nigeria’s CBN Mandates Instant Debits for Banks Receiving Fraudulent Funds
In a decisive move to combat financial fraud, the Central Bank of Nigeria (CBN) has directed the Nigeria Inter-Bank Settlement System (NIBSS) to debit the settlement accounts of commercial banks that receive fraudulent proceeds.
This directive reinforces the CBN’s commitment to strengthening Nigeria’s financial security by holding banks and fintechs accountable for lapses in their fraud detection systems.
Strengthening Fraud Prevention Measures
Effective January 2025, the new regulation mandates that financial institutions enhance their transaction monitoring capabilities. Banks that fail to identify or prevent fraudulent transactions will face immediate debits once such activities are reported. The directive is expected to drive improvements in Know Your Customer (KYC) protocols, which the CBN has emphasized as a cornerstone of financial security.
“This means banks and fintechs are now directly responsible for the money that flows into their accounts. KYC has always been the foundation of financial security, not just in Nigeria but globally,” noted Adedeji Olowe, founder of Lendsqr.
A Policy Rooted in Precedent
Reports indicate that this measure has been informally in place since December 2024, following a major fraud incident in which a Nigerian bank lost ₦7 billion. In response, NIBSS debited the settlement accounts of the fintech that received part of the fraudulent funds without prior notice.
With this official directive, financial institutions will now be required to enhance transaction monitoring, strengthen fraud detection systems, and take proactive measures to safeguard Nigeria’s financial ecosystem.
