The Nigerian Communication Commission (NCC) constituted a Multi-Sectorial Committee on e-Fraud (the “Fraud Committee”), according to the Guardian of 21st November 2019, the Fraud Committee will “help in combating financial fraud through telecommunications.”

Members of the Fraud Committee include representatives of the Central Bank of Nigeria (CBN), NCC, Nigerian Inter Bank Settlement System (NIBSS), National Identity Management Commission (NIMC), Association of Licensed Telecommunications Operators of Nigeria (ALTON), and Federal Ministry of Justice”. Other members of the Fraud Committee include representatives of Nigerian Banks, newly rejigged Federal Competition and Consumer Protection Commission (FCCPC), and security agencies who have higher number of representatives.

The NCC is a principal regulator of Nigeria’s telecommunication sector as well as other value added services in telecommunication industry. Its functions under the Nigerian Communications Act 2003, include to develop and monitor performance standards and indices relating to the quality of telephone and other communications services and facilities supplied to consumers in Nigeria having regard to the best international performance indicators as well as to make and enforce such regulations as may be necessary under the Act to give full force and effect to the provisions of the Act.

Statistics for mobile payment related fraud in Nigeria is above single digit. Nairametrics’ 24th October 2019 report states CBN’s Financial Stability Report (December) 2018 which pegs mobile payment channels related fraud in Nigeria at 28.21% (twenty eight decimal point twenty one percent) second to ATM (automated teller machine) related frauds that stood at 34.87% (thirty four decimal point eight seven percent) while POS (point of sale system) related fraud was at 19.55% (nineteen decimal point twenty one percent) for the year 2018. We argued on https://thenigerialawyer.com/liabilities-of-banks-for-ussd-banking-services-in-nigeria-by-osita-enwe-esq/ that POS frauds largely include mobile payment channel related frauds because USSD banking frauds can also be consummated through POS withdrawal on any POS enabled accounts or by agency banking.

There are germane reasons for Regulators to rein in on Nigerian Banks, payment service providers, mobile money operators, mobile network operators, and value added services aggregators. Its principal regulators include NCC and CBN. We hold the view that FCCPC is a necessary watchdog for Nigerian’s vulnerable consumers.

For reasons shown below, we, maintain that consumers of telecommunication and its value added services such as mobile payment services have no need of the Fraud Committee, rather, Regulators should enforce the CBN’s and NCC’s Regulations that applies to mobile payment service industry.

The Regulations include CBN’s Framework for the Use of Unstructured Supplementary Service Data (USSD) in the Nigerian Financial System 2018 (the “USSD Framework”), NCC’s Guidelines on SIM Replacement 2017, Consumer Protection Framework for Banks and other Financial Institutions regulated by CBN 2016, CBN’s Directives on Establishment of Industry Fraud Desk 2015, CBN’s Guidelines for the Regulation of Agent Banking and Agent Banking Relationship in Nigeria 2013 and, NCC’s Guidelines on Short Code Operations in Nigeria 2003 (the “Industry Guidelines”).

The USSD Framework which is most recent is more elaborate and timely than all the other Industry Guidelines. It requires Banks and other mobile payment service providers to install proper encryptions and message authentication solutions that include “a minimum combination of International Mobile Subscriber Identity (IMSI), Date of SIM Swaps, Date of Mobile Station International Subscriber Directory Number (MSISDN) Recycle, International Mobile Equipment Identity (IMEI), Date of device change amongst other measures.

In line with NCC’s Guidelines on SIM Replacement, MTN Nigeria Communications PLC published its requirements for SIM replacement or swap (https://www.mtnonline.com/personal/sim-service/sim-swap/) as follows:

• the phone number must be registered (which include biometric information)
• SIM pack or other evidence of direct purchase or ownership or a sworn affidavit attesting to ownership and loss
• three (3) frequently dialed numbers
• details of your last recharge activities
• valid means of identifications such as international passport or driver’s license

A customer who seeks to replace or swap his SIM card by proxy will provide MTN Nigeria with a sworn affidavit showing reasons for replacement or swap, reasons for inability to carry-out replacement or swap in person, copy of his valid means of identification and a valid means of identification of his authorized representative. We note that NCC that warehouses biometric data of Nigerian consumers does not require biometric data verification for SIM replacement or swap and, telecom operators only stick to the minimum requirements in line with the Guidelines on SIM Replacement. This does not show any disposition to the customers’ interest in view of high rate of mobile money related frauds.

Should NCC and CBN combine the proactive provisions of USSD Regulation and, biometric data verifications to SIM replacement or swap procedures, mobile money related frauds will be sufficiently checked in the industry, because, the porous process of SIM swap or replacement will become watertight and impassable.

The USSD Regulation mandates Bank and mobile money operators not to send customers’ sensitive information such as PIN (personal identification number) through their USSD application as well as the second factor authentication otherwise known as one time password (OTP) which Bank and mobile money operators shall not send to its Customer through the Customer’s telephone number or device registered on the USSD application. E-fraud preventive measures under the Industry Guidelines are sufficient if Regulators clearly implement it for the sake of consumers.
FCCPC, consumer rights and interest groups together with other stakeholders should prevail on Regulators to enforce the industry Guidelines instead of NCC’s attendant albeit unnecessary expenditure of tax payers’ money and other resources on the Fraud Committee.

CBN’s Consumer Protection Framework 2016 requires Banks and mobile money operators to have toll free lines for its customers. As at 16th October 2019, Guaranty Trust Bank PLC (Gtb) does not have a toll free line dedicated to its teeming customers which violates its duties under the CBN’s Consumer Framework – perhaps its representatives sit on the Fraud Committee.
The Guardian report include a statement attributed to the Executive Vice Chairman of NCC who “has stressed the need for Customer Service and Fraud Operations teams in banks and mobile network operators to put in place, stronger processes and tighter guidelines on how to detect potentially fraudulent activities, and to compensate victims where prevention mechanisms fail.” We note that CBN’s directive on Establishment of Industry Fraud Desk (“Fraud Desk Guideline”) requires Banks, Switches and, payment service providers not only to route all transactions on any e-channels through NIBSS’ central anti-fraud solution but also “to implement across all e-channels, an enterprise fraud monitoring system, which ensures behavioural monitoring, patterns and hold/block controls on transaction suspected to be fraudulent.”

Should Regulators, in the interest of Consumers, require Banks and mobile money providers to strictly comply to the Industry Guidelines, the Fraud Committee will return to their primary responsibilities in their respective public or private employment.

Executive Vice Chairman of NCC should not advise Banks to provide toll free lines to its customers in the presence of CBN representatives who ought to know that any default is a sanctionable breach, perhaps, the Fraud Desk Guideline are unknown among the Regulators’ representatives. Consumer Rights and Interest Groups and other Stakeholders should campaign for strict regulatory enforcement procedures and compliance reporting in the industry.

Under the Industry Guidelines, Regulators do not need to work “with critical’ yet overburdened ‘stakeholders such as the Nigerian Police Force; Economic and Financial Crimes Commission (EFCC); the Independent Corrupt Practices Commission (ICPC); and other relevant agencies to implement technical and operational solutions in this regard” as the Guardian of 21st November quoted NCC. NCC and CBN enjoy the capacity to require Banks and mobile money operators to comply to the Industry Guidelines.

CBN’s USSD Framework subjects Banks and other mobile money operators to NCC’s regulations such as the Guideline on Short Codes. In our view, some of the Industry Guidelines may require amendments yet, provisions under the Industry Guidelines are enough to secure mobile money payments in Nigeria and, the fledgling mobile payment industry. The industry cries for proactive Regulators and not fraud Committee no matter how well constituted. Regulatory risks is said to be the abattoir of any business enterprise in Nigeria.

NCC and CBN as Regulators enjoy Consumers’ mandate to protect it from Nigerian Banks and mobile money operators by requiring Banks and mobile money operators to comply to the Industry Guidelines without the Fraud Committee’s input. All stakeholders including National Assembly should assist CBN and NCC to realize its function of proactively regulating Nigeria’s mobile money payment sector.

Osita Enwe Esq. is a Managing Associate at SRJ Legal Practitioners and regularly advise Clients on consumer rights and protections under Nigerian laws.