Kidnapping: Concerns mount over poor KYC by fintechs issuing PoS

There are growing concerns over the poor Know Your Customer (KYC) policy by some financial technology companies (Fintechs) while issuing Point of Sales Terminals (PoS) to customers.

The growing relevance of PoS adoption has helped to bridge the gap created by the shortage of Automated Teller Machines (ATMs) deployed by banks, as many Nigerians now withdraw through PoS agents. 

The profitability of POS transactions for both banks and vendors has bolstered the growing deployment of POS. The cost of the transaction is often borne by the customers, creating profit for the POS operator and the bank.

The number of Point of Sales (PoS) machines deployed by merchants and individuals across Nigeria rose to 1.8 million in 2023 according to the Nigeria Inter-Bank Settlement System (NIBSS).

However, observations by Daily Trust and other stakeholders in the financial space show that some fintechs are not conducting due diligence, especially in the area of KYC as kidnappers and armed robbers now use these PoS terminals at gunpoint to collect money from victims’ bank accounts.

How PoS is used to aid crime

Daily reports have tracked numerous cases of the deployment of PoS to aid criminal enterprises.

Recently, the Police Command in Kwara State said criminals are now disguising themselves as point of sales (PoS) agents to rob and collect kidnap ransom.

According to the Commissioner of Police, Victor Olaiya, the criminal elements hibernate within the ranks of PoS agents through which, “Kidnap ransom is paid through PoS in some cases and we have cases where robbers now go to homes with PoS machines.”

Similarly, the Oyo State Police Command recently paraded three Point of Sale (PoS) operators alongside seven other suspected kidnappers terrorising the Lagos/Ibadan Expressway.

In another recent development, as a result of increased public outcry over alleged illicit activities involving Point-of-Sale (PoS) machine operators and some police officers, the Nigeria Police reinforced its ban on the use of PoS machines, and other electronic mobile money transaction devices within police stations and other facilities nationwide.

Nigerians react to the ugly trend

Speaking to Daily Trust, a banker with one of the Tier-1 banks, who is not authorised to speak, said there is an urgent need for the Central Bank of Nigeria to rain in on poor KYC of some FinTech’s issuing POS Terminals.

According to him, “It is no more news that kidnappers and some criminals/hoodlums possess PoS terminals and use them at gunpoint to withdraw money from victims’ accounts under duress and these transactions cannot be traced.

“Anybody can wake up any day and purchase a PoS terminal from any of these fintechs without adequate KYC.

“And when a crime is perpetrated, if at all you are able to get the details of the PoS terminal through the victim’s account and you present it to the issuers, they cannot provide the account holders nor any helpful link that can lead to their arrest.

This has been going on for a while now and no one is having the conversation on how PoS terminal proliferation is providing a big room for criminal activities.”

Also lending his voice to the development, a finance expert, Joseph Momoh, said the central bank ought to step up its regulatory game before the situation gets out of hand.

He said aside from the fact the situation is deteriorating, Nigerians have become desperate to the extent of crowdfunding and paying ransom which negates the law.

Strict implementation of KYC to the rescue

Reacting to the development, the Central Bank of Nigeria (CBN) recently implemented a pivotal amendment to Section 1.5.3 of the Regulatory Framework for Bank Verification Number (BVN) Operations and Watchlist for the Nigerian Banking Industry.

Analysts have said, while adhering to the CBN’s regulations on BVN and NIN linkage, “we collectively contribute to a more secure and transparent financial ecosystem for all Nigerians. This fosters trust, mitigates risks, and paves the way for a thriving financial landscape.”