Customers in panic as First Bank loses ₦7 billion to fraud incidents

Recall First Bank, Nigeria was hit by a massive fraud incident that led to the theft of ₦7 billion from customer accounts by unknown persons, according to one person with direct knowledge of the matter. Three other persons who asked not to be named discussing sensitive company matters confirmed the incident.

The scope and complexity of the incident highlight the increasingly sophisticated nature of fraud in Nigeria’s financial services sector. Nigerian banks lost ₦43 billion to fraud in Q2 2024, yet those numbers are likely underreported. Only 60 of 163 financial institutions in Nigeria reported fraud cases, according to a Nigeria Inter-Bank Settlement System (NIBSS) report; many choose not to report incidents over fear of reputational harm.

The fraud incident at First Bank, which reportedly began several months ago, involved the unauthorised diversion of funds from several customer accounts. While the exact mechanism of the fraud remains unknown, three people with knowledge of the incident said the stolen funds were then moved to multiple bank accounts, including those of two fintech companies, a tactic fraudsters use to obscure the trail of illicit funds and make it difficult for law enforcement to trace and recover the money.

Despite the large amount involved, the fraud reportedly went undetected for months, suggesting significant internal control gaps. In May 2024, a First Bank employee had fraudulently diverted ₦40 billion over a two-year span before eventually being discovered. Two people with direct knowledge of the matter said the bank’s comprehensive audit showed that the total amount the employee diverted was around ₦60 billion.

That incident led to the dismissal of 100 employees and was thought to be connected to the abrupt exit of the bank’s CEO.

First Bank communication team did not respond to a request for comments on this story after several calls.

According to sources with knowledge of the matter, First Bank has begun the recovery process and reported the case to law enforcement. Banks and fintech typically work with the police and courts to recover stolen funds. It remains unclear if First Bank has taken legal action over the matter.

Meanwhile First Bank recently named a risk guru as Chief Executive Officer and now it is becoming clearer why the banking behomoth is focusing more on controls after it was reported that a staff made away with a whooping forty four billion Naira over a two-year period.

The immediate past Chief Executive Officer Adesola Adeduntan suddenly resigned from his job in April in a brief letter sent from Washington where he was attending the annual World Bank/IMF metings. “I have, however decided to proceed on retirement with effect from 20 April 2024 to pursue other interests,” said Adeduntan who joined the bank in 2014.

First Bank has never explained the circumstance of its CEO’s departure.

However, in his place, the bank named Olusegun Alebiosu as Managing Director and Chief Executive. Alebiosu was until this appointment the executive director, chief risk officer and executive compliance officer since January 2022. Prior to that, he was the group executive/chief risk officer, a position he held since 2016.

Report of the fraud that was uncovered at First Bank has sparked considerable chatter on social media which began after a report by TechCabal and then amplified by one Ndusuisi Ekekwe, the lead faculty at Tekedia who said he always thought it curious and perhaps wrong the manner of the sudden leadership changes.

According to him, “today, we are hearing that one demon operated there for two years and cleared N44bn” after an employee at a Lagos branch allegedly diverted funds in a scheme that went undetrected for almost two years.”

Confirmation that the fraud had caused ripples in the bank came by way of a letter dated May 10, 2024 purportedly written to the Lagos state Police Commissioner.

In the letter, the bank said, “we hereby bring to your notice the discovery of fraudulent transactions into various transactions within and outside the bank and request your good offices to set up the machinery of investigation with a view to unravel the circumstances surrounding the said fraud and to get the culprits apprehended to face the wrath of the law.”

It was discovered that the alleged perpetrator made fraudulent transactions to his wife’s account domicled with another bank and from where the funds were then transferred to other beneficiaries totalling 34. Form here, the funds developed wings and flew into a total of 1,190 accounts in various banks subsequently.

In his comment on X, one Dr A. TuruMbe said the revelation brought to his memory a case 20 years ago when he worked with a bank on Ahmadu Bello way in Victoria Island, Lagos.

Another user of X claimed the money that was stolen “is from dispense error, it gets moved by the end of work day and transaction deleted. It has gone for about two years, what gave him away was the issue of submarine cable that affected telcos and banksd in April. The transaction piled up for those days.”

According to another commentator on X, “banks and other financial institutions need to have elevated risk management and fraud detection systems in place. The downside of evolving technology is that crooks will always want to exploit any vulnerability to their advantage.”

There have also been questions as to why this fraud went on for as long as it did. According to Nkwuda Chinedu, “there are much obvious questions begging for answers – is their system not automated? Is there no Maker-Checker in place as known traditionally in banking? Has the staff no supervisor and no audit for the period?”

Other commewntators have also asked to know how one staff can be left solely in charge of reversal funds where he would have unchecked access to move funds unchecked?

Mr Victor Frank in a comment on X, said, “the problem with the Nigerian government is evident in the banking sector. I cannot imagine how a whooping N44bn will be scattered around without triggering an alert.”

One bank customer on X said because the alleged culprit was stealing bank customer reversal, it was hard for the bank to detect and that this is why bank customers wait endlessly to have their transfers reversed and their bank accounts credited.