Interswitch, the renowned payments infrastructure giant in Africa, has initiated a comprehensive fund recovery operation following a crippling system glitch that led to a loss of ₦30 billion or $40 million due to chargeback fraud.
Revelations about this financial setback have surfaced through court documents obtained by TechCabal and three individuals familiar with the situation.
The company is currently pursuing legal avenues to recoup the lost funds and has officially reported the fraudulent activity to the Economic and Financial Crimes Commission (EFCC), Nigeria’s anti-money laundering agency.
According to an insider, Interswitch has made significant progress in recovering over ₦10 billion of the stolen funds, indicating a determined effort to mitigate the damage caused by the glitch.
Interswitch, in response to the reports, has chosen to remain silent on the matter, refraining from offering any comments or statements regarding the incident.
The court documents presented by Interswitch highlight a motion filed by the company concerning the suspected bank accounts involved in the fraudulent transactions.
In an additional move, the payments giant has requested that 54 banks take precautionary measures by imposing restrictions on hundreds of identified bank accounts.
These restrictions will remain in effect until the investigation and fund recovery process is brought to a satisfactory conclusion. A legal expert from a prominent Nigerian law firm with knowledge of the ongoing case confirmed these developments.
The chargeback fraud in question appears to span several years, with sources indicating that the issue has been ongoing for an extended period, though specific dates remain undisclosed.
The current incident is intricately linked to former and current Interswitch employees who may have exploited vulnerabilities within the company’s systems. This breach of trust has already led to the arrest of at least one individual, sources also revealed.
The recent chargeback fraud scandal underscores the growing challenge of fraud in Nigeria’s financial services industry.
Over the past four years, the sector has witnessed a surge in fraudulent activities with Nigerian financial institutions collectively reporting losses of ₦159 billion ($201.5 million) due to fraud cases since 2020, according to data from the Financial Institutions Training Centre (FITC).
The incident serves as a stark reminder of the urgency to fortify cybersecurity and financial safeguards in an increasingly digitalized financial landscape.