Bank verification system as an effective tool in curbing bank fraud

CHAPTER ONE

INTRODUCTION

1.1 Background of the study

The bank verification system is an initiative aimed at protecting bank customers and further strengthening the Nigerian banking system with the increasing incidents of compromise on conventional security systems (password and PIN), there is a high demand for greater security on  access to sensitive or personal information in the banking system. Bank verification system gives each bank customer a unique identity across the banking industry in Nigeria. The Bank Verification Number commonly called BVN is a biometric identification system implemented by the Central Bank of Nigeria to curb or reduce illegal banking transactions in Nigeria. It is a modern security measure in line with the Central Bank of Nigeria Decree to reduce fraud in the Nigerian banking system.

The Central Bank of Nigeria in collaboration with all Nigerian banks launched a centralized biometric identification system tagged Bank Verification Number (BVN).

The Bank Verification Number (BVN) is an important step the Central Bank of Nigeria (CBN) is using to strengthen the security of banking transactions and to ensure that fraudulent transactions are minimized, if not totally eliminated.

The BVN uses biometric technology to register customers in the financial system, it records these physical features which are unique to individuals fingerprints and the face, the record is used to identify the person, once a person’s biometrics have been recorded and BVN issued, the account would be accessed through the BVN, it has really helped to protect bank customers, reduce fraud and strengthen the Nigerian banking system. Biometric enrolment is helpful to people who cannot read and write, their finger prints and pictures would serve the same purpose as signatures. Multiple account holders would be covered with a single registration in any of the banks where they have accounts. BVN helps the banking system reduce situations where loan defaulters, for instance move from one bank to the other and the banks extend new credits to them, without knowing their history.  Banks would be able to track transactions across all banks in Nigeria with more ease. As CBN implements the BVN initiative, it ensures the security of the data from rogue bankers and also importantly from damage as has been the experience with other sectors that engaged in biometric enrolments. It also creates measures to punish banks that might exploit the information they have to blackmail customers with whom they have disagreements. The BVN is a great initiative that reduces illegal banking transactions and improve national financial intelligence gathering. The interests of account holders is being accorded a whole lot of importance so that their increased confidence in the banking system would improve the financial standing of banks and in that case the customers will use the banks more when they know that their transactions are safe. BVN offers vast opportunities to protect customers, banks and the entire financial system.

Information technology has received a lot of advancement over the years thus encouraging more improvement in information security. In order to improved security measures in many data-driven applications, authentication like biometric plays important roles. Since computers form the major tools used in processing data and manipulating information in many sector (e.g. banking sector), there is need to have adequate security for these computers, meanwhile computer security as the need may be is to secure physical location, hardware and computer software from outside threats. There exist multiple layers of computer security namely- physical security, personal security, operational security, communication security, network security and information security. All these layers of computer security have received series of researcher’s attentions since the information age and a lot of improvement has been recorded on them. Meanwhile, the layer of information or software security still needs a lot of attention as well as other layers. It is true that computer softwares are used to process data and verily customers account details in the banking sectors. These computers need vigorous software security because any little compromise by the system like the banking Automatic Teller Machine (ATM) application, can lead to loss of large amount of money which can create problem for the banks and their customers. Meanwhile for a very long time the banking sectors have been using account number, account name and customers signature for account verification and authentication. These methods of verification and authentication of bank customers has make banking operation to be very easy for the elite and highly difficult for the non-elite and have so many challenges in securing the customers data and money. This is true because people can easily copy someone account number, forge his/her signature to commit fraud on that persons account. Recently the central bank of Nigeria make it mandatory for all bank customers to register their biometric information with their respective banks. However these biometric are not used yet as a means of account verification and authentication. Meanwhile biometric is the utilization of physiological characteristics to differentiate an individual. It utilizes biological characteristics or behavioral features to recognize an individual. It is a new way to verity authenticity. However, there are challenges and opportunity associated with the use of biometric fingerprint as a means of account verification and authentication.

The rapid growth of information security, fingerprints are highly used to secure information system and are highly reliable. These make many researchers agitating for the full use of this technology in securing information indifferent sectors. Finger print has so many application like banking security, ATM security, card transaction, physical access control, voting, identification of criminals.

Biometric fingerprint are unique to every human, they are generations of numerous ridges and valleys on the surface of human figure, a finger print is the flows of ridges patterns in tip of the finger, among all biometric traits, the fingerprint has one of the highest levels of reliability.

                      

1.2  Statement of problem

Bank verification system is a great initiative system that would reduce illegal banking and improve national financial intelligence gathering which will boost the economy of the nation. The process however comes with it’s own challenges which ranges from linking BVN’s with accounts of the BVN registration as customers with multiple bank accounts still have to undergo almost the same process to link their accounts with their BVN.

 

1.3 Objective of the study

The main objective of the study is to ascertain the bank verification system as an effective tool in curbing bank fraud. However, for the successful completion of the study, the following sub objectives were put forward by the researcher:

(i) To examine the advantages of bank verification system as an effective tool in curbing bank fraud.

(ii) To identify the factors militating against the bank verification system as an effective tool in curbing bank fraud.

(iii) To ascertain the impact of bank verification system as an effective tool in our society.

(iv) To examine the threats and weaknesses of the implementation of the bank verification system in our society.

 

1.4  Research question

For the successful completion of the study, the following research questions were formulated:

(i) What are the advantages of bank verification system as an effective tool in curbing bank fraud?

(ii) What are the factors militating against the bank verification system as an effective tool in curbing bank fraud?

(iii) How can the impact of the bank verification system as an effective tool in our society be ascertained?

(iv) How can the threats and weaknesses of the implementation of the bank verification system in our society be examined?

 

1.5 Significance of the study

It is conceived that at the completion of the study, the findings will be of great benefit to the society as a whole that are always using bank verification system during transaction from one account to another; the study will also be of great benefit to the users of the social media on delivering adequate information to the international scene.

It is conceived that the study will also be of great importance to researcher who are in need of information on similar field. Finally, the study will also be of great importance to lecturers, teacher’s students and the general public.

 

1.6 Scope and limitation of the study

The scope of the study is bank verification system as an effective tool in curbing bank fraud. However, the study has some constrained and limitations which are:

• Availability of research material: The research material available to the researcher is insufficient, thereby limiting the study.
• Time: The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.
• Finance: The finance available for the research work does not allow for wider coverage as resources are very limited as the researcher has other academic bills to cover.

 

1.7 Definition of terms

Bank verification system

It is an initiative aimed at protecting bank customers and further strengthening the Nigerian banking system with the increasing incidents of compromise on conventional security systems.

Tool

It is a device or implement especially one held in the hand, used to carry out a particular function.

 

 

Curbing

It is to restrain or to keep in check.

Bank fraud

Bank fraud is the use of potentially illegal means to obtain money, assets or other property owned or held by a financial institution or to obtain money from depositors by fraudulently posing as a bank or other financial institution.

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