Nigeria’s anti-graft regulator has linked the movement of N18.7 billion in fraud-related funds through the financial system to persistent failures in customer due diligence and transaction monitoring across parts of the banking and digital finance ecosystem.
The Economic and Financial Crimes Commission said its investigations revealed that weaknesses in Know Your Customer procedures, account monitoring, and suspicious transaction reporting allowed large volumes of illicit funds to circulate without triggering internal controls.
According to regulatory findings, multiple financial institutions processed high-value and structured transactions connected to organised fraud schemes without adequate verification of customer identity or transaction purpose.
These lapses, investigators said, created pathways for proceeds to be converted into digital assets and transferred beyond local oversight.
The regulator linked the funds to two large-scale schemes that affected hundreds of thousands of Nigerians. In both cases, payments were routed through formal financial channels in a manner designed to mimic legitimate activity, masking fraudulent intent and delaying detection.
Investigators also identified instances of excessive account proliferation and transaction concentration, where single customers operated unusually large numbers of accounts used primarily for illicit activity. Such patterns, the regulator said, should have triggered enhanced due diligence and immediate reporting under existing compliance frameworks.
The findings raise broader concerns about the effectiveness of internal controls within segments of the financial system, particularly as digital transactions accelerate and financial services become increasingly technology-driven.
Regulators warned that compliance failures at institutional level expose the entire system to reputational and stability risks.
From a policy standpoint, the disclosure signals a shift toward stricter accountability for financial institutions. The regulator indicated that negligence in monitoring customer activity may attract sanctions, including suspension and prosecution, as enforcement priorities move beyond individual fraudsters to systemic enablers.
The regulator also called for stronger coordination between supervisory agencies to enforce compliance standards uniformly across banks, fintech companies, and microfinance institutions.
Emphasis is being placed on proactive monitoring rather than reactive investigation after losses have occurred.
Market analysts note that the case highlights growing regulatory sensitivity around digital assets and payment channels, particularly where they intersect with weak compliance environments. Financial institutions are expected to strengthen controls as scrutiny intensifies.
The regulator said enforcement actions will continue as part of a broader crackdown on money laundering and abuse of digital financial infrastructure, signalling that compliance failures will no longer be treated as operational lapses but as material regulatory breaches.
