Reps Decry Rising Surge in Fraudulent Activities Linked to POS

The House of Representatives has raised concern over rising surge in fraudulent activities linked to Point-of-Sale (POS) operators nationwide. POS terminals are now a popular cash source for businesses and individuals seeking alternatives to ATMs, even though ATM fees are lower.

Speaking at a resumed investigative hearing with fintech stakeholders at the National Assembly Complex on Monday, the Chairman of the House Ad-hoc Committee on the Economic, Regulatory and Security Implications of Cryptocurrency Adoption and POS Operations in Nigeria, Hon. Olufemi Bamisile, lamented what he described as the infiltration of unlicensed crypto-related activities in the sector.

Bamisile disclosed that the Committee has received multiple reports of unprofiled agents, cloned terminals, anonymous transactions, and weak Know-Your-Customer practices, which he said are putting Nigerians at serious risk of financial loss, cybercrime, and security breaches.

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

“There are allegations and credible information that some POS operators now engage in crypto-related services for which they are not licensed. This raises serious red flags around anti-money laundering, terrorism financing, data integrity, and the misuse of instruments originally designed for basic payment services,” he said.

The law maker added that the Committee had been alerted to the registration of phony companies at the Corporate Affairs Commission, some of which allegedly use the National Identification Number and Bank Verification Number of unsuspecting citizens to open accounts and launder illicit funds through unverified POS channels.

“This highlight weak verification mechanisms and underscores the urgent need for a coordinated oversight framework,” he said.

He also disclosed that the Committee will investigate the storage of sensitive customer data on foreign servers by major fintech companies operating in Nigeria, warning that keeping data outside the country’s jurisdiction undermines regulators’ and security agencies’ ability to conduct audits, trace suspicious transactions, or enforce compliance.

“This has direct national security implications, especially in a sector connected to terrorism financing risks and cyber-enabled crimes,” he said.

Despite the concerns, Bamisile assured operators that the engagement was not a witch-hunt but an effort to rid the sector of practices harmful to the fintech industry.

“Our mandate is clear: to recommend legislation that will deliver a harmonised regulatory framework, stronger security safeguards, improved consumer protection, and an environment where innovation and investment can flourish responsibly,” he said.

The National President of the Association of Digital Payment and POS Operators of Nigeria, Paul Okafor, warned that the POS ecosystem has reached a critical emergency point, with fraud rising to a level that now poses a direct national security threat.

Okafor told lawmakers that while POS operators had increased from 50,000 in 2017 to more than 2.3 million in 2025, regulatory capacity had grown by “less than 10 per cent”.

“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.”

Quoting data from the Nigeria Inter-Bank Settlement System, Okafor said POS, banking, and digital-payment channels suffered N17.67bn in fraud losses in 2023, affecting more than 80,000 customers. The situation worsened sharply in 2024, with losses rising to N52.26bn—an increase of N34.59bn in one year.

“More than 38,000 POS fraud cases were officially reported in one year. Unofficially, we estimate that over 70,000 cases go unreported because victims simply give up.

“In some states, security agencies report that nearly 40 per cent 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 warned.

Okafor urged the Committee to issue a directive compelling the CBN to introduce urgent reforms to stabilise the system.

“If we fail to act, fraud will escalate, kidnappers will continue to exploit the system, Nigerians will lose more money, financial inclusion will collapse, and trust in the financial system will be destroyed. And when trust dies, the financial system dies,” he said.

To restore order, he outlined three measures ADPPON wants implemented immediately: mandatory Nigeria Police Force–NCCC Cybercrime Clearance Certificates for all POS operators; mandatory CAC registration for every POS business; and mandatory membership of recognised trade associations to enforce training, discipline, and self-regulation.

“These are practical, lawful solutions aligned with existing laws and international standards. They can be implemented without creating new legislation,” he told lawmakers.

Okafor cited examples from other countries, noting that India, Kenya, Brazil, South Africa, and the United Kingdom enforce strict oversight to protect their POS ecosystems.

“In Brazil, agent fraud dropped by over 60 per cent after the government mandated police vetting. India, with over five million agents, maintains low fraud rates because verification is non-negotiable. 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 emphasized.