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Nigeria: CBN Enforces Instant Debits on Banks Receiving Fraudulent Funds to Curb Financial Crime

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CBN Enforces Instant Debits on Banks Receiving Fraudulent Funds to Curb Financial Crime
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In a decisive effort to combat financial fraud, the Central Bank of Nigeria (CBN) has mandated the Nigeria Inter-Bank Settlement System (NIBSS) to debit the settlement accounts of commercial banks and fintechs found receiving fraudulent funds. This directive strengthens regulatory oversight and underscores the CBN’s commitment to enhancing financial security across Nigeria’s banking sector.

Strengthening Fraud Prevention Measures

Effective January 2025, financial institutions must reinforce their fraud detection and transaction monitoring systems. Banks and fintechs that fail to identify or prevent fraudulent transactions will face automatic debits as soon as such activities are flagged. The policy is expected to drive improvements in Know Your Customer (KYC) protocols—an essential component of financial security.

“This means banks and fintechs are now directly responsible for the funds they receive. KYC has always been the foundation of financial security, not just in Nigeria but globally,” stated Adedeji Olowe, founder of Lendsqr.

A Policy Rooted in Precedent

Reports indicate that this measure was informally implemented in December 2024 after a significant fraud case in which a Nigerian bank suffered a ₦7 billion loss. In response, NIBSS debited the fintech’s settlement account that received a portion of the fraudulent funds without prior notice.

With the official directive now in place, financial institutions must proactively strengthen transaction monitoring and fraud detection systems to ensure compliance and protect Nigeria’s financial ecosystem from illicit activities.

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