Operators recommend AI to tackle financial fraud

The former executive director of e-business and infrastructure at Inlaks Computers Limited and a board member of CitiData Centre Ltd., Tope Dare, has advocated the use of artificial intelligence for early detection of fraud in the financial sector.

In a statement, Dare said AI was transforming the banking sector like every other industry, and the nature of customer & bank interaction was fast changing globally.

He explained, “Just late last month, DeepSeek stepped up as a serious contender, challenging the dominance of models like ChatGPT. What makes DeepSeek different? Open-source access, cost efficiency, and strong technical capabilities—a combination that could shake up the AI landscape.

“AI is rapidly reshaping banking, making transactions faster, fraud detection smarter, and customer service more efficient. However, with all these innovations leading to rapid transformation come both opportunities and challenges.

“Cybercriminals are getting more and more sophisticated, but only an AI-powered fraud detection system can help financial institutions to stay one step ahead. By analysing transaction patterns, AI can instantly flag suspicious activities & prevent fraud before it happens. Nevertheless, AI isn’t perfect; misinterpretations and system bias can lead to serious consequences.

“During the last Detty December in Lagos, a friend of mine who came home from Europe had his foreign bank account access deactivated after the first transaction in Nigeria, and despite his best efforts, he couldn’t reactivate it until he returned home. AI made a quick decision, but without human judgement, the foreign bank’s system failed to consider context, leaving him stranded.”

Dare noted that AI chatbots by eBanqo and others have revolutionised banking by providing instant, round-the-clock customer support.

He added, “They handle routine tasks like checking balances, funds transfers, and processing loan applications in seconds. Today, AI can analyse your spending habits and provide tailored advice on savings, investments, and credit repayment options. It’s convenient, but at what price?

“For instance, AI relies on vast amounts of personal data, making it an attractive target for cybercriminals. If AI is trained on biased data, it may unintentionally discriminate against certain demographics, affecting loan approvals and financial services.

“On the future of a balance between AI and human expertise, I can only say that AI is here to stay, and its role in banking will only grow and wax stronger. However, banks must strike a balance between automation and human oversight. The best approach? A hybrid model where AI handles routine tasks while humans manage complex concerns. This ensures that banking remains fast, secure, and inclusive, without losing the human touch that customers still value.”

The Chief Executive Officer of FITC, Dr Chizor Malize, earlier at the FITC Risk Round Table with the theme ‘Financial System Stability, Leveraging AI for Financial Fraud Detection and Regulations’, emphasised the role of emerging technologies like artificial intelligence in combating the rise of cyber threats and digital risks, which have been exacerbated by advancements in technology.

Malize highlighted FITC’s proactive approach in providing industry insights and fostering collaboration among stakeholders to address these challenges.

“As the Fraud Risk Report underscores, there is an urgent need for leveraging AI to mitigate risks and bolster the stability of the financial system. FITC has been pivotal in bringing together industry leaders, regulators, and operators to develop AI-driven cybersecurity frameworks and predictive tools. By integrating AI into our training programmes and risk simulations, we empower organisations to anticipate, mitigate, and manage risks effectively.”

Also, the Chief Executive Officer of NDIC, Bello Hassan, represented by Director of Enterprise Risk Management at NDIC, Amal Haruna, acknowledged the growing challenge of financial fraud in various forms, including payment fraud, insider fraud, account takeovers, identity theft, money laundering, and fraudulent transactions.

A report by the Financial Institutions Training Centre revealed a 50 per cent increase in fraud-related financial losses and a 100 per cent surge in digital fraud incidents in the Nigerian financial services sector between Q1 and Q3 of 2024, calling for immediate and decisive action within the sector.

According to the report, fraud cases have escalated across all platforms, with the rise of digital transactions further amplifying the risks.

The report said financial institutions in Nigeria have suffered a significant hit due to the growing sophistication of cyber fraud, identity theft, and insider collusion.