The House of Representatives Ad-hoc Committee investigating the economic, regulatory and security risks associated with cryptocurrency adoption and Point-of-Sale (POS) operations has raised fresh concerns over what it described as a rapidly worsening fraud crisis threatening Nigeria’s financial system.

At a resumed investigative hearing on Monday, Chairman of the Committee, Hon Olufemi Bamisile, said engagements with stakeholders had revealed “deep gaps” in the country’s digital finance ecosystem, exposing citizens to significant financial and security risks.

Bamisile disclosed that the Committee had received multiple reports of unprofiled agents, cloned terminals, anonymous transactions and weak Know-Your-Customer (KYC) practices, all of which, he warned, have contributed to a surge in fraud across POS networks nationwide.

“We are concerned about the growing rise in fraud associated with POS operations,” he said. “Unprofiled agents, cloned terminals and weak KYC practices continue to expose citizens to preventable dangers.”

He also expressed alarm over the infiltration of unlicensed cryptocurrency activities into POS operations, saying some operators now offer crypto-related services without regulatory approval. According to him, such practices raise “serious red flags” linked to anti–money laundering risks, terrorism financing, data integrity breaches and the misuse of platforms originally meant for basic payments.

Bamisile said the Committee had further been alerted to cases where phoney companies were registered at the Corporate Affairs Commission (CAC) using stolen National Identification Numbers (NIN) and Bank Verification Numbers (BVN) of unsuspecting Nigerians to open accounts and launder illicit funds through unverified POS channels. He added that the storage of sensitive financial data on foreign servers by some fintech firms also undermines regulators’ ability to conduct audits, trace suspicious transactions and enforce compliance, posing a direct national-security risk.

Despite these concerns, he assured operators that the investigation was not designed to stifle growth, acknowledging that the industry faces its own challenges, including fragmented regulation, overlapping mandates among agencies and inconsistent policies. He said the Committee aims to recommend legislation that would harmonise regulation, strengthen security safeguards, improve consumer protection and support responsible innovation.

The Committee will continue interfacing with regulators, fintech actors and security agencies before submitting its final recommendations to the House.

At the hearing, the National President of the Association of Digital Payment and POS Operators of Nigeria (ADPPON), Mr Paul Okafor, warned that Nigeria’s POS ecosystem has reached a “critical emergency point,” with fraud escalating to levels that now pose a direct threat to national security.

He said the explosive growth of the sector, from 50,000 POS operators in 2017 to over 2.3 million today, had overwhelmed regulatory capacity, which he noted expanded by “less than 10 percent” over the same period.

“This imbalance is what has produced the crisis we are facing today.

“The regulators, especially the CBN, are not incompetent; they are overwhelmed by the sheer speed and scale of growth,” he said.

Citing data from the Nigeria Inter-Bank Settlement System (NIBSS), Okafor reported that POS, digital-payment and banking channels lost N17.67 billion to fraud in 2023, affecting more than 80,000 customers.

The situation, he said, worsened sharply in 2024, with losses climbing to N52.26 billion, an increase of N34.59 billion in one year.

He noted that attempted fraud across financial channels surged by 338 percent, while POS channels alone accounted for 26.37 percent of all incidents recorded. Industry monitor FITC also reported a 95 percent spike in POS-related fraud in Q4 2024.

“More than 38,000 POS fraud cases were officially reported in one year,” he said.

He added: “Unofficially, we estimate that over 70,000 cases go unreported because victims simply give up.”

Okafor also warned that criminals are increasingly using POS agents as cash-out points for illicit funds, including kidnap ransom payments.

“In some states, security agencies report that nearly 40 percent of kidnap ransom payments pass through informal POS cash-out channels. This is no longer a fintech issue; this is a national security threat,” he said.

He urged the Committee to compel the Central Bank of Nigeria (CBN) to urgently implement systemic reforms, warning that failure to act would erode financial inclusion, destroy public trust and destabilise the nation’s payment ecosystem.

To restore order and rebuild confidence, Okafor recommended three immediate measures: mandatory Nigeria Police Force–NCCC Cybercrime Clearance Certificates for all POS operators; compulsory CAC registration for every POS business to ensure traceability; and mandatory membership of recognised trade associations to enforce discipline, training and self-regulation.

He noted that these recommendations align with global best practices in India, Kenya, Brazil, South Africa and the United Kingdom, countries that enforce strict oversight systems, police vetting and continuous certification to curb fraud.

“No country leaves its financial system open to millions of operators or puts it in the hands of foreigners without strict controls. Nigeria must not be the exception,” he said.

Okafor added that POS services now reach virtually every household, market and community across the country. (Vanguard)

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