The Managing Director and CEO of the Nigeria Deposit Insurance Corporation, Mr. Bello Hassan, has called for the integration of Artificial Intelligence technologies to improve fraud detection in Nigeria’s financial institutions.
Speaking at the Risk Management Roundtable organized by FITC, Mr. Hassan highlighted the limitations of traditional fraud detection methods, which rely heavily on manual verification and human analysis.
He emphasized that AI technologies, including Machine Learning (ML), Natural Language Processing (NLP), and Anomaly Detection, have the potential to revolutionize fraud prevention efforts, offering more efficient and accurate tools for identifying suspicious activity.
Mr. Hassan explained how AI could significantly enhance fraud detection for banks and financial institutions in Nigeria. He stated, “AI can process vast amounts of data in real time, identify unusual patterns, and detect emerging threats long before they cause significant harm.”
He elaborated on how AI could flag irregular transactions, such as large withdrawals from new geographic locations, and either freeze accounts or alert stakeholders in real time. AI’s ability to analyze extensive datasets and multiple factors also helps reduce false positives, allowing institutions to focus on genuine threats.
Additionally, AI’s capacity to track cross-border transactions and monitor user behavior, including typing patterns and device usage, strengthens defenses against identity theft and account takeovers.
Mr. Hassan also addressed the role of regulators in ensuring the ethical use of AI technologies in the financial sector. He emphasized that financial regulators must establish clear standards to ensure AI is used transparently and in a way that respects data privacy and consumer rights.
He praised the Federal Ministry of Communications, Innovation, and Digital Economy for developing Nigeria’s first National Artificial Intelligence Strategy, which seeks to unlock the transformative potential of AI while ensuring ethical and sustainable implementation.
Globally, organizations such as the Financial Stability Board and the Basel Committee on Banking Supervision are also creating guidelines for AI adoption in financial services.
Mr. Hassan stressed that AI could also enhance regulators’ abilities to detect suspicious transactions and anticipate threats through predictive analytics, allowing them to take preemptive measures to safeguard the financial system.
Moreover, AI could streamline regulatory processes, enabling more efficient resource allocation and prioritizing high-risk transactions.
While recognizing the potential of AI, Mr. Hassan cautioned about the challenges of deploying these technologies in the financial sector. Key concerns include ensuring compliance with data protection regulations, such as the Nigeria Data Protection Regulation, and securing AI systems from cyber-attacks.
He also underscored the importance of eliminating bias in AI models to maintain fairness and trust. “Transparency in AI decision-making is essential,” he said. “Regulators must establish frameworks to monitor AI systems and ensure they operate ethically and in line with legal standards.”
He called on stakeholders to embrace AI while ensuring robust regulatory frameworks are in place to mitigate risks.
Mr. Hassan’s remarks come amid a rising tide of fraud in Nigeria’s financial landscape. The latest fraud and forgery report for Q3 2024, released by FITC, revealed a sharp increase in fraud cases and the amount involved.
According to the report, fraud cases reported by Nigerian banks surged by 65% from 11,532 in Q2 to 19,007 in Q3. The amount attempted in fraud also spiked, with fraudsters attempting to steal N115.9 billion in Q3—marking a 105% increase compared to N56.6 billion in Q2.
Despite this surge, the report noted a significant decline in losses, with only N10.1 billion successfully stolen, representing a 75.4% decrease from the N42.8 billion lost in the previous quarter.
This highlights the importance of effective fraud detection systems, such as AI, in reducing financial losses.
