No fewer than 23 Nigerian banks received inflows amounting to N28.7 billion executed in 460,000 transactions through the Mavrodi Mondial Moneybox (MMM) Ponzi scheme within six months, the 2016 annual report of the Nigeria Electronic Fraud Forum (NeFF) has revealed.
The amount, which was moved between June and December 2016, is 61 per cent higher than the budget of the Federal Ministry of Education and almost six times over the budget of the Nigerian Defence Headquarters (DHQ) in the 2017 budget, the report erroneously stated.
A quick fact-check by THISDAY of the 2017 budget, as passed by the National Assembly, showed that N139.3 billion was allocated to the Ministry of Defence for its capital spending programme for the year, while N330.54 billion was allocated for recurrent expenditure.
In the case of the budget of the education ministry, the National Assembly passed a provision of N398.70 billion for recurrent spending and N56.72 billion for capital expenditure for the year.
The report disclosed that by the time the scheme “crashed” on December 13, 2016, over N11.9 billion had been lost by gullible subscribers.
The NeFF report, which was unveiled in Abuja Tuesday at a stakeholders workshop on cybercrime, organised by the Central Bank of Nigeria (CBN), disclosed that since the MMM scheme had a 30-day cycle before return-on-investment (RoI) was realised, everyone who put money into it after November 12, 2016 did not get their money out.
“No fewer than 23 banks received inflows amounting to N28.7 billion executed in 460,000 transactions through the MMM Ponzi scheme. The amount put into the scheme between November 13th and December 15th, 2016 (through interbank transactions) totals over NGN11.9bn. This amount was largely not recovered.
“To put this amount into perspective, the 2017 budget for Defence Headquarters is N4.7 billion. This implies that the amount transferred by Nigerians under the MMM Ponzi scheme would have funded the Nigerian Defence HQ almost six times over.
“Majority of the transfers made by customers of banks that participated in the MMM Ponzi scheme were made through the account-to-account transfer platform.
“This was followed by the mobile channel, and lastly, through the web channels of other transfer platforms in the industry,” the report said.
It added that 34 financial institutions paid out money for investments into the MMM Nigeria Ponzi scheme, adding that the customers included those of commercial banks, mobile payment operators as well as mortgage banks.
“By the side are the amounts, in terms of volume and value for each financial institution that money was paid out from. Fewer banks received inflows of MMM transactions than the number of banks from which outflows occurred,” the NeFF report stressed.
It also stated that MMM followed the usual pattern of Ponzi schemes, pointing out that “they continue to build momentum and crash when the maximum amounts are already invested in the scheme”.
The NeFF report added that the peak of the MMM investment was in November 2016, when over N13 billion was transferred among the participants, pointing out that the CBN had in the middle of 2016 warned about the dangers of the scheme.
In a related development, the volume of fraud reported in 2016 indicated an 82 per cent increase in reported cases, with an estimated N2.19 billion losses.
The NeFF 2016 annual report titled, “A Changing Payments Ecosystem: The Security,” said the financial industry recorded an 82 per cent rise when compared to 2015 and over 1,200 per cent rise when juxtaposed with the situation in 2014.
According to the report, despite the 82 per cent increase in reported fraud cases, the industry was able to reduce fraud by 2.7 per cent when compared to the 2015 figure.
“Comparing the attempted fraud against the actual losses, the industry was able to salvage 49.7 per cent of the total amount attempted by these fraudsters within the year.
“These figures informed us that there are more attempts on a yearly basis with different innovation tricks or modus operandi to take advantage of the system,” the NeFF report said.
The report also noted that 2016 witnessed a significant transaction increase across all payment channels in both volume and value in spite of the economic recession.
“In contrast with 2015, there was a 71.43 per cent spike in the volume of transactions processed through the NCS (Nigeria Central Switch),” it said.
In his address at the unveiling of the NeFF 2016 annual report, CBN’s Director, Banking and Payments System and NeFF Chairman, Mr. Dipo Fatokun, stated that the Nigeria Interbank Settlement System (NIBSS) report of the Nigeria fraud landscape for 2016 indicated that fraud cases grew by 82 per cent over the 2015 figures, attributing the trend to the increased usage of new payment platforms.
Meanwhile, the CBN Governor, Mr. Godwin Emefiele, has called on stakeholders to ensure that the Cybercrime Act is effectively enforced, to serve as a deterrent and constant reminder to those who may wish to engage in illicit activities targeting the financial technology infrastructure.
“It is now about two years into the commencement of the Act, and so it is not too early to conduct a holistic review of its implementation, hence the theme of this workshop: ‘Tackling Enforcement Challenges under the Cybercrime Act’,” Emefiele said.
He noted that as the regulator of the financial sector, the CBN is constantly confronted with issues raised by operators who occupy the unenviable position of first line of defence against cyber attacks on the systems, networks and infrastructure through which financial services are carried out in the country.
“While the issue about cyber security is not wholly legal in nature, and while considerable efforts have been made by the CBN and banking operators, especially through the Bankers’ Committee and other bodies, leading to reduced incidents of fraud on the one hand, and very high consumer confidence in our payment system on the other, we are nevertheless desirous that the Cybercrime Act is effectively enforced, to serve as a deterrent and constant reminder to those who may wish to engage in illicit activities targeting our financial technology infrastructures,” he said.