NDIC urges Nigerian financial institutions to deploy AI for fraud detection

Speaking at the Risk Management Roundtable organized by FITC, he emphasized the growing inadequacy of traditional fraud detection methods that rely on manual verification and human analysis. 

Mr. Hassan described AI technologies like Machine Learning (ML), Natural Language Processing (NLP), and Anomaly Detection as revolutionary tools capable of enhancing the efficiency and accuracy of fraud prevention efforts. 

Analysing how AI could aid fraud could boost fraud detection for Nigerian banks and other financial institutions, he said: 

“AI can process vast amounts of data in real-time, identify unusual patterns, and detect emerging threats long before they cause significant harm,” Mr. Hassan stated.  

Mr. Hassan also addressed the regulatory aspect of AI adoption, stressing the importance of setting standards for its ethical and transparent use.  

“Financial regulators and supervisors must ensure public trust by guaranteeing that AI technologies reinforce stability without infringing on data privacy or consumer rights,” he noted. 

While acknowledging AI’s potential, the NDIC MD cautioned against its challenges. Key concerns include compliance with data protection regulations, such as the Nigeria Data Protection Regulation (NDPR), and ensuring AI systems’ security against cyber-attacks.  

Mr. Hassan also stressed the importance of eliminating bias in AI models to maintain fairness and public trust. 

“Transparency in AI decision-making is essential,” he stated. “Regulators must establish frameworks to monitor AI systems and ensure they operate ethically and in line with legal standards.” 

He urged stakeholders to embrace AI while prioritizing robust regulatory frameworks. Other speakers at the meeting emphasized the need for collaboration in the financial industry to tackle the fraud challenge alongside the deployment of technology.

The NDIC MD was speaking against the backdrop of the rising cases of fraud in the Nigerian financial landscape.  

The latest fraud and forgery report for Q3 2024 released by the FITC, revealed that there was a spike in reported fraud cases by banks and the amount involved in fraud.