Experts recommend AI to combat financial fraud.

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Tope Dare, former Executive Director of e-business and infrastructure at Inlaks Computers Limited and a board member of CitiData Centre Ltd., has advocated for the use of artificial intelligence (AI) to detect financial fraud early.

In a statement, Dare said, “AI is rapidly reshaping banking, making transactions faster, fraud detection smarter, and customer service more efficient.” He explained that AI-powered fraud detection systems can help financial institutions stay ahead of cybercriminals by analysing transaction patterns and instantly flagging suspicious activities.

However, Dare noted that AI is not perfect and can lead to misinterpretations and system bias. He cited an example of a friend whose foreign bank account access was deactivated after a transaction in Nigeria, and despite 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 said.

Dare also highlighted the benefits of AI chatbots in banking, saying they have revolutionised customer support by providing instant, round-the-clock assistance. “They handle routine tasks like checking balances, funds transfers, and processing loan applications in seconds,” he added.

However, Dare warned that AI relies on vast amounts of personal data, making it an attractive target for cybercriminals. He also noted that AI may unintentionally discriminate against certain demographics if trained on biased data.

On the future of AI in banking, Dare said, “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.”

Dr. Chizor Malize, CEO of FITC, emphasised the role of emerging technologies like AI in combating cyber threats and digital risks. “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,” Malize said.

Malize highlighted FITC’s proactive approach in providing industry insights and fostering collaboration among stakeholders to address these challenges. “FITC has been pivotal in bringing together industry leaders, regulators, and operators to develop AI-driven cybersecurity frameworks and predictive tools,” she added.

Bello Hassan, CEO of NDIC, represented by Director of Enterprise Risk Management at NDIC, Amal Haruna, acknowledged the growing challenge of financial fraud in various forms. A report by the Financial Institutions Training Centre revealed a 50% increase in fraud-related financial losses and a 100% surge in digital fraud incidents in the Nigerian financial services sector between Q1 and Q3 of 2024.

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.

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