The Art of War against Fraud as a Digital Lender

The Art of War against Fraud as a Digital Lender

It’s no news that “financial fraud” is on the rise and it can closely be regarded as the closest friend to “rape”. They share more things in common as compared to others, which is the silence of victims. Fintechs, particularly, lending as a service companies in Nigeria, have been “raped” over the years and most have decided to take the path of silence.

If rape is such a terrible offense with severe consequences, why do rapists often get away without consequences? The answer is pretty straightforward, albeit very sad: Most rape victims would rather keep mum than expose these bastards.

As a digital lender in this dynamic landscape, you're not just in the business of financing futures, you're a warrior on the frontlines of a silent war. This is your handbook – a strategic guide to outmaneuvering fraudsters and safeguarding your digital fortress.

We'll explore cutting-edge defensive measures, craft intelligent risk-assessment strategies, and identify the red flags that separate genuine borrowers from cunning imposters. Join us as we navigate the battlefield of Nigerian digital lending, where innovation meets vigilance, and every transaction is a strategic maneuver in the war on fraud.

The Silence of Fintechs

Would you believe that since the rise various fintechs in Nigeria, there has been a systematic rape of banks and fintech? Tallying over N20 billion lost to frauds and hack, every bank and fintech hit has been groaning in silence but no one is ready to speak up.

Patricia was a victim of such hacks and fraud. Patricia, a crypto trading platform, is currently facing the battle of repaying thousands of its customers whose money had disappeared through the breach in its system.

Earlier in 2023, it was reported that hackers stole N2.9 billion from Flutterwave’s account. In its response to the report, Flutterwave said it noticed unusual activities in its systems and told users to activate safety protocols, but it insisted that customers did not lose any funds.

While the company denied that money was lost, the events that followed proved otherwise. Court documents that later found their way to social media showed certified true copies of a petition by Flutterwave’s legal counsel to the police dated February 20, 2023.

The letter asked for police assistance to recover funds by obtaining court orders from the magistrate court to sustain account freezes on 107 bank accounts in 27 banks that allegedly, directly or indirectly, received money from the illegal transfers from Flutterwave accounts.

The Effective Weapon for Digital Lenders against Fraud


In the high-stakes world of digital lending, the fight against fraud transcends firewalls and algorithms. A potent, yet often underestimated weapon lies in the subtle art of reporting. Imagine a network where lenders share not just success stories, but also the tactics fraudsters employ.

By reporting suspicious activity, digital lenders can create a knowledge base that empowers the entire industry. This collaborative effort exposes emerging trends, allowing lenders to identify and address potential vulnerabilities before they become widespread problems.

Detailed reports provide a vital roadmap for law enforcement agencies. Information on fake identities, money laundering schemes, and social engineering tactics equips authorities to investigate, apprehend criminals, and disrupt their operations. Effective reporting can dismantle criminal networks and deter future attacks.

Reporting suspicious activity serves as an internal red flag. By analyzing reported incidents, lenders can identify weaknesses in their own systems and processes. This introspection allows them to implement stricter verification procedures, enhance fraud detection algorithms, and educate staff on the latest scams.

Reported data becomes the fuel for intelligent defense mechanisms. By analyzing patterns in fraudulent attempts, lenders can develop risk-scoring models that flag suspicious loan applications. This data-driven approach allows lenders to filter out potential scams before they even reach the approval stage.

The art of reporting lies in its subtlety. It's a silent weapon that disrupts fraudsters' plans, fosters collaboration, and empowers law enforcement. By harnessing the power of information sharing, digital lenders can create a more secure lending environment for all.

Who do I report to?

As a business owner or digital lender, the million dollar question remains, who do I report cases of these hacks and frauds to?

Fear not! There are regulatory bodies which you can report these cases to instead of remaining silent.

Credit Bureaus

Credit bureaus such as CRC, FirstCentral, and CreditRegistry should be informed promptly about cases of loan defaults. This action not only protects your interests but also safeguards fellow lenders from potential harm. Timely reporting ensures that crucial information is available to the lending community, enabling informed decisions and preventing individuals with a history of defaulting from taking advantage of others.

Private Blacklist

Just like the adage “Once bitten, twice shy” says, utilizing private-owned blacklists is also an effective security measure. This approach emphasizes the strength of the "community" in combating bad actors and defaulters, believing that unity is key to success.

The Central Bank of Nigeria (CBN)

The Central Bank of Nigeria (CBN) recommends promptly reporting substantial fraud cases. While it may be challenging to explain the complexities to higher-ups in the finance sector, it is crucial not to overlook fraud cases. Official documentation of security breaches, hacks, and other incidents is essential for a safer financial environment.

Nigeria Inter-Bank Settlement System (NIBBS)

Despite the challenges involved in reporting fraud cases to the Nigeria Inter-Bank Settlement System (NIBSS), prompt reporting is necessary. This ensures the official documentation of fraudulent activities within the financial ecosystem, even if the process may seem as difficult as rocket science.

Way forward for every party

For lenders within this ecosystem, it is our responsibility to strictly adhere to Know Your Customer (KYC) regulations and conduct appropriate profiling for suspicious transactions (with particular attention to round-tripping). By committing to robust KYC processes and meticulous transaction scrutiny, we can effectively identify and prevent potential risks, ensuring a safer and more trustworthy lending ecosystem for all participants.

In addition, regulatory bodies such as the CBN must simplify and depersonalize the reporting process. They should also enforce strict adherence to Customer Due Diligence, which will assist fintechs in identifying and reporting suspicious activities. The Credit bureaus also have a role to play by continuously updating the information in their databases and reducing the cost of acquiring data, especially for small-scale lenders.

Most importantly, it is imperative for the Government, in collaboration with key regulatory bodies, to implement policies that impose severe and costly consequences for fraud. For example, individuals caught engaging in fraudulent activities could face transaction bans or hefty fines, with the possibility of restitution payments to compensate for the damages caused by the fraud.