13 February 2011

Nigeria: CBN, Banks And Automated Teller Machines (ATMs)


We totally support the CBNs circular of 7th February, 2011, which was addressed to Deposit Money Banks (DMBs) and Acquirers, on the issue of "Penalty for Non-Compliance with CBN Circulars and Guidelines on ATM Operations in Nigeria".

In fact, we are told that what made the recent circular necessary, was the fact that previous ones on the subject matter have been 'disregarded with impunity' hence the need to 'bring order into the market by stipulating some penalties for non-compliance for the CBN directives and policies on ATM operations'.

Among other things, the CBNs latest Circular stipulates that: for non compliance with payment card industry data security standards (PCIDSS), a fine of N50, 000 per week will apply until compliance is established; failure to provide audit trials and journals for ATM transactions will attract a fine of N50, 000; failure to establish help desk contacts will attract a fine of N50, 000 for each day of infraction; Non-functional help desk contacts will attract a fine of N50, 000 for each day of infraction; for failure to disclose ATM surcharge to customers a refund of the surcharge to the affected customers will be enforced by the CBN; for lack of online monitoring mechanism and back-up power (inverter) for ATM, a fine of N50, 000 per day will apply; an ATM without camera installed will attract a fine of N50, 000 and deactivation of the ATM until the camera is installed; a fine of N50, 000 per day will be applied for late submission of return/data on ATM frauds when required; failure to respond to the customer or to the CBN on ATM complaints within 72hours will attract a fine of N50, 000 per day for each complaint after the 72hours until response is received; while, failure to resolve any ATM dispute with evidence of resolution within 14 days, the deplorer will refund the total amount involved in the fraud. In addition, other non monetary punishments include, naming the offender in the Bankers' Committee Meeting; and suspending the offender from participating in clearing operations until the infraction is corrected.

Since it made its debut in Nigeria, many agree that the use of ATM has become an important aspect of the country's banking system. This is given that it provides bank customers with access to financial transactions in a public space without the need for a human clerk or bank teller; increased hours of operation as well as access by a greater number of clients beyond the branch network. To say the least, the use of ATM machines simply makes banking more convenient. Of course Nigerians have reacted positively and that is why over N80 billion are presently moved around monthly using ATM machines.

Nevertheless, the use of these machines have also been characterised by high level fraud, which has led many to part with so much money, even as several others have simply distanced themselves from the ATM machines rather preferring to stick to other manual and time consuming alternatives. In fact, as its usage has increased so has its exposure to security risks. Fraudsters have remained on the drawing board making effort to see how they could come up with different fraud skills to beat security. It is not surprising therefore that ATM users have been exposed to different types of challenges including card thefts and pin frauds resulting in loss of funds. Other problems associated with the use of ATMs in Nigeria include insufficient disbursable funds, withholding of customers cards, vocal messages that attracts attention, inadequacy in terms of required denominations, lack of efficient power supply, debiting customers accounts even when no cash has been dispensed etc. The unfortunate thing is that the banks that own these ATMs have either paid lip service to the frustration of their customers or are alleged to be accomplices of these crimes.

In fact, the truth of the matter is that the menace of ATM fraudsters will not abate unless there is concerted effort by banks, law enforcement agencies and financial crime investigator/prosecutors to fight the problem. At the same time, banks in the country must also realise that their ability to satisfy and retain their customers in the present global competition entirely depends largely on the development of their Information Technology (IT) infrastructure.

We observe with dismay that ever since the introduction of ATM in Nigeria, practically very little has been done in the area of training and research. This is given our conviction that to deal comprehensively with this challenge will require ATM deplorers, systems auditors, internal auditors/controllers, legal teams and operational risk managers to acquire additional knowledge and skills on how to prevent, detect and investigate different forms of ATM frauds. But this will equally ultimately require collaboration by the different stakeholders. We wonder for instance, that several years after the ATM was introduced in Nigeria, no University in the country is as yet running a post-graduate programme on such an important subject matter. We therefore challenge our banks to fill this lacunae immediately given that it is even in their interest to do so.

Furthermore, we enjoin the CBN to march words with action by ensuring that their own help desk is up and running immediately. In fact, the CBN needs to set up dedicated help lines to enable aggrieved Nigerians to report cases of abuse if and when they occur. In any case, it was because the CBN has been lackadaisical with enforcement in the past that such issues even arose in the first place.

We dare say that these actions will make our banking environment safer, while it will enable Nigeria to maintain its present position as the fastest growing ATM market in Africa.

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