Recovering funds lost to fraud is a crucial aspect of the financial industry, yet even the funds recovered can sometimes fall back into the hands of fraudsters.
Referencing Nigerian author Chinua Achebe’s “Things Fall Apart,” the need for financial institutions to adapt to evolving fraud tactics is highlighted as fraud cases in Nigeria’s financial sector continue to rise.
In the first quarter of 2024, financial institutions in Nigeria reported a significant number of fraud cases. When fraud incidents occur, banks and fintech companies collaborate with law enforcement and legal entities to assist customers in regaining lost funds through court orders that can freeze accounts or reverse questionable transactions.
Commercial banks typically receive refunds through bank drafts, while fintech firms utilize partner banks to hold recovered funds in fraud recovery accounts before returning them to customers. However, these recovery accounts are not immune to hacking threats. For instance, one African fintech lost a substantial sum it had helped customers recover from fraudsters due to its recovery account being fraudulently hacked.
The stolen funds were dispersed across accounts in various banks and fintech companies, complicating the recovery process. This incident has left the fintech facing challenges in explaining to clients the status of their recovered funds and has prompted the fintech to seek legal intervention to compel other financial entities to provide customer information for account blocking and potential perpetrator identification.