Recent reports highlighting the surge in banking fraud across Nigeria should serve as a wake-up call for the financial sector. The situation also highlights the urgent need to upgrade the Central Bank of Nigeria’s decade-old payment security policy, which still largely relies on two-factor authentication (2FA). In today’s threat environment, banks must begin transitioning toward stronger “proof-of-life” three-factor authentication (3FA) frameworks.

Fraud is no longer limited to card cloning or simple phishing schemes. Criminal networks are now deploying artificial intelligence, automation and insider collaboration to attack financial institutions at scale.

Nigeria’s banks have made impressive progress in digital banking adoption, but many of the security controls still in place were designed nearly ten years ago. The fraud environment has since changed dramatically. Attackers are now using AI-assisted social engineering, synthetic identities, automated payment testing, and deepfake voice impersonation to bypass traditional authentication and monitoring systems.

One of the most concerning risks is account takeover targeting large corporate customers. Corporate treasury accounts typically hold the largest balances and process high-value transactions, making them prime targets for sophisticated fraud rings. A single compromised corporate account can result in losses far exceeding those seen in retail banking fraud.

At the same time, the industry must confront another uncomfortable reality: insider-enabled fraud and sabotage. Globally, a growing proportion of major fraud incidents involve some form of internal access—whether through compromised staff credentials, manipulation of transaction controls, or collusion with external criminal networks.

According to Ive Chike Meme, Director at Environ Technology Systems, stronger authentication frameworks must now become a regulatory priority.

“Public trust for reimbursement of unauthorised transactions is at a low point. The Central Bank of Nigeria has already permitted the use of advanced biometric authentication such as finger-vein proof-of-life technology as part of a three-factor authentication framework. However, broader industry adoption remains slow outside of the Tier 1 banks,” he said.

Meme noted that while institutions such as the Nigerian Financial Intelligence Unit (NFIU) play an important surveillance role in monitoring financial flows, they are not a law-enforcement agency. Meanwhile, agencies such as the Economic and Financial Crimes Commission (EFCC) often face operational challenges in recovering stolen funds once fraudulent transfers have already occurred.

“For this reason, prevention must become the priority. Legal liabilities in a court of law will become the major new challenge given it is common knowledge that 2FA tokens passwords and PINS are widely compromised. Stronger authentication and fraud-prevention infrastructure can significantly reduce the number of successful attacks before funds leave the banking system, however the main driver to protect all bank account holders must come from the CBN or the office of the National Security Adviser (NSA)” he said.

He added that some banks have already begun implementing 3FA next-generation authentication platforms, with production deployments expected in the second half of the year due to typical six-month integration and deployment timelines.

Beyond authentication, experts say protecting against modern fraud requires a broader upgrade in banking security architecture. This includes AI-driven fraud monitoring, behavioural analytics, stronger identity verification, and real-time protection for high-value corporate transactions.

Nigeria’s banking sector has an opportunity to stay ahead of an increasingly sophisticated threat environment. But doing so will require decisive action from regulators and financial institutions alike—before today’s fraud surge becomes tomorrow’s systemic risk.