Nigeria must remove kidnappers and 'one shot gangs' from its money transfer systems

“When they announced that we had been kidnapped, at first I was just laughing. I was busy looking for a hidden camera because I thought it was a prank. You know, the usual social media pranks,” Kemi Gbadamosi* recounted his ordeal at the hands of a criminal gang operating the “one shot” scheme and exploiting weaknesses in Nigeria’s instant payment system.

Within an hour, she was beaten, sexually assaulted and threatened with rape before her family paid a ransom of N2 million through a POS machine.

Mrs. Gbadamosi had left her house in the Gbagada area of ​​Lagos State at about 5:30 am on October 10, 2023. That morning, her biggest concern was to avoid the usual heavy traffic along the route to the Island from Lagos, where the bank he worked with is located. The events that followed left a scar and changed her forever. His routine was simple: wake up before 5am and get to the bus stop before 6am. Any deviation from this time could mean spending hours in traffic.

On that fateful day, she arrived at the bus stop on time, alongside another lady.

She did her usual check when a Toyota Sienna vehicle pulled up alongside her. The passengers inside were well dressed and appeared to be in their 40s. Reassured, she and the other lady entered. She became more relaxed when the driver paid the agbero (park tout) at the bus stop. However, less than five minutes into the journey, one of the passengers announced to him: “This is a kidnapping”.

“They were well dressed and in their 40s. Immediately the car started moving and they started attacking us. They announced that they were kidnappers.

“They asked me how much I had in my account. I told them, and later they asked me to start opening my bank accounts,” she said during a phone interview.

Based on her experience as a bank employee, she attempted to block her access to the mobile app by intentionally entering the wrong password. She knew that after three failed attempts, she would be blocked. Unfortunately for her, the kidnappers were familiar with the tactic. On the second attempt, the gang leader warned her: “If you try again, we will rape you.”

“As I was scared of being raped, I had no choice but to open all my mobile apps,” she said, pausing periodically as she narrated.

This was not the only time they threatened to rape. They considered the threat an effective strategy alongside the beating.

When the money in her bank account was insufficient, she was asked to call her family to send more money. In the end, the kidnappers collected N2 million from her and another N2 million from the second victim.

Ms Gbadamosi is just one of hundreds of people who have been kidnapped for ransom or as a one-off, where kidnappers used mobile money transfers without authorities being able to locate them.

For this report exploring how criminals are exploiting vulnerabilities in the country's instant payments system, afriLatest Headline interviewed several other victims whose stories are similar.

All this happens despite the mandatory linking of all bank accounts in Nigeria to the Bank Verification Number (BVN), a unique 11-digit identifier that links a person's financial accounts to their biometric data.

According to a recent report from the National Statistics Department (NBS), N2.2 trillion was reportedly paid as ransom to the kidnappers within 12 months.

The Criminal Experience and Security Perception Survey (CESPS) estimated that the average ransom collected was N2.7 million. This worrying report paints a grim picture that threatens Nigeria's rapidly developing instant payments system.

According to Premier Oiwoh, CEO and Director General of NIBSS, 10 billion mobile transactions were carried out in Nigeria in 2023.

Speaking at the launch of the 2024 SIPS (State of Inclusive Instant Payment Systems) report in Accra, Ghana, Mr Oiwoh stated that the country is expected to have around 12 billion transactions by 2024.

In recent years, the instant payment system has grown exponentially in Nigeria. Experts attributed this growth to the inclusion of fintech companies in the payments system. The reshuffle of the naira in 2022 and the resulting cash shortage have accelerated the adoption of mobile money. Even traders in markets now have POS machines.

However, enforcing regulatory compliance has been a major challenge in the industry, especially for payment service providers who own POS devices.

According to 2024 reportThis lack of regulatory compliance prevents the NIP system from reaching full maturity.

“As for how inclusivity is likely to evolve at the system level, the NIP in Nigeria currently has the highest probability of achieving mature inclusivity in the future. It has integrated all use cases, including G2P and cross-border payments, the latter through integration with PAPSS.

“The only mature criteria that have not yet been met involve providing additional recourse channels for end users who need to dispute a transaction. To be fair, the feature is an area of ​​development for all other systems and is complex to implement as it requires additional resources and monitoring”, reads the 2024 SIPS report.

Experts say enforcing compliance rules would help address the challenges. Stanley Jacob, an expert in the fintech sector, told afriLatest Headline that criminals can be easily tracked if banks or operators are held responsible for providing information about their customers.

“It is not impossible to track criminals. It's easier than many of us imagine. The banking sector is like a club. When you have a club, you immediately admit a bad player; the club is exposed to bad behavior. As far as I am concerned, I think the Central Bank needs to do much more to protect consumers.

“This also applies to any agreement, whether electronic or on paper. The point is: if I transfer money to a bad player in a bank, then the bank should also be held responsible if it fails to produce the customer.

“The moment you admit them into the settlement system, they must also be subject to the same strict rules as other banks. They must be able to produce and present it to their customers. POS is just a device; the money is still domiciled in a specific bank account,” he said during a phone interview.

Another expert, Babatunde Obrimah, said some criminals use gaming and cryptocurrency platforms to make it difficult to track their transactions.

To meet the challenge, Obrimah said interoperability efforts involving telecommunications regulators and anti-corruption agencies are needed.

“The problem is that part of the money passes through gaming platforms and cryptocurrencies. If money is being transferred from bank to bank, it is easy to track it. This is why regulation is important. There must be interoperability between regulators. Some even use the money to buy airtime.

“There must be collaboration between telecom operators, NCC, EFCC, NFIO, Central Bank and banks. There's a lot of talk going on. However, collaboration between regulators is not easy,” he said.

CBN's recent efforts to curb criminal activities in the instant payment system

Recently, the Central Bank of Nigeria (CBN) has been trying to curb the activities of these criminals by issuing strict circulars to regulate the activities of POS operators in the country.

Last September, the CBN issued a new directive requiring all Payment Service Providers (PSPs) to integrate their transactions through a Payment Terminal Service Aggregator (PTSA) to streamline and track electronic transactions in the country.

PSPs are required to submit monthly statements to the CBN, detailing the number of merchants and agents they manage, the deployment of their POS terminals and the volume of corresponding transactions.

The report is expected to reach the CBN no later than seven days after the end of each month.

The circular also warned that non-compliance within 30 days of issuance would result in appropriate sanctions.

A central bank source, who did not want his name used because he is not permitted to speak to the media, said some of the bank's actions are expected to produce results by 2025. He added that POS operators have operated in the past with impunity. , but most now comply or risk sanctions.

Last month, the House of Representatives also took steps to resolve the issue following a motion tabled by Idem Uyime.

In the motion, the lawmakers resolved that the CBN should shut down the platforms used by single-opportunity operators.

Pending the release of results, victims like Gbadamosi have resorted to lifestyle changes or even stopped using mobile banking as precautionary measures.

“One thing I learned from the ordeal is that my account that has money in it, I don't have a cell phone app for that and I don't even leave an SMS alert on my cell phone. I made some adjustments. It made me a little smarter. Even if I decided to have a mobile app, it wouldn't be visible,” she said.

*Kemi Gbadamosi is a pseudonym created for the victim after she asked that her real name not be published.

This report is produced under the DPI Africa Journalism Fellowship Program of the Media Foundation for West Africa and Co-Develop.