IMPACT OF ENAIRA IN TRACKING MONEY LAUNDERING AND FRAUD IN NIGERIA
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IMPACT OF ENAIRA IN TRACKING MONEY LAUNDERING AND FRAUD IN NIGERIA
CHAPITER 1
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
As it expedites online transactions, the promotion of cashless policies has become a motivating factor for developing economies to research currency digitization. Online publishing and retailing, e-banking, and other uses of e-transactions are continually shaping trends and opportunities for business via the Internet.
In order to close the e-commerce loop, it is crucial for the electronic environment to become more advanced and mature (Bickersteth, 2005). This encourages consumers to switch from traditional payment methods like cash, checks, and other paper-based legal tender to electronic substitutes like e-tranzact, Western Union money transfer, and pocketmonie.
An electronic transaction is a commercial service that makes use of information and communications technologies, such as integrated circuit (IC) cards, encryption, and telecommunications networks. E-transaction technologies are necessary for adapting to significant changes in socioeconomic trends.
The transfer of financial value between all parties is impacted by the transaction system, which is a collection of institutions, instruments, rules, procedures, standards, and technicalities. As a result, some economies have begun to digitise their currency.
According to Gilbert, Scott, and Loi, Hio. (2018), digital currencies are similar to traditional currencies in certain ways but rarely have a physical presence, unlike printed banknotes or minted coins.
Online transactions are almost instantly completed because to the absence of a physical form, and transportation fees for currency and coins are also eliminated.
Digital currencies have the benefit of speedy settlement, especially in online communities, therefore they will continue to be useful for inter-party transactions as long as both parties recognise the currency’s legitimacy.
The majority of governments around the world have refrained from endorsing or granting any sort of legitimacy to transactions carried out through such channels,
so even though cryptocurrency is the most well-known type of digital currency, there are thousands of others in the modern world. Each of them operates and enjoys security thanks to the mutually adopted encryption codes by the parties in such transactions.
The transition from paper to digital money has started in international economies, with Nigeria not far behind, taking advantage of rapid technological development and financial industry expansion.
Abdulkareem M. (2021) claims that central banks all over the world have been carefully developing their digital currencies by gradually weaning themselves off of rapidly declining cash payments.
The Central Bank of Nigeria joined the fray in order to ensure that Nigeria is not left behind, which led to the launch of her e-Naira, which comes after instructing banks to close cryptocurrencies and cryptocurrency-related accounts in February 2021. (premiumtimesng.com).
Even though the e-naira was introduced, Ubah Jeremiah Ifeanyi (2021) emphasised that a weak transaction system can significantly affect an economy’s stability and development capacity; its failures can lead to inefficient use of financial resources,
unequal risk-sharing among agents, actual losses for participants, money laundering, fraud, and a loss of confidence in the financial system and the use of money. Due to their decentralisation and relative anonymity, he continued, digital currencies are useful tools for money laundering—the crime of concealing illicit wealth by changing it.
1.2 STATEMENT OF THE PROBLEM
Prior to the launch of the electronic naira, Nigeria’s paper naira had a serious foreign exchange problem. The pace of naira depreciation also produced a great deal of concern among people, which made it necessary to test an alternative legal tender (Ubah, 2021).
In addition, as the CBN indicated earlier this year, cryptocurrency is prohibited in 2021, necessitating the transition of the nation’s currency from paper to electronic.
After the e-Naira was introduced, a report on Daily Trust (2021) highlighted that people are starting to worry about the security of this new digital currency and whether or not it is vulnerable to hackers and scammers.
People are worried about the security of their future wallet due to the high frequency of fraudulent operations in Nigeria, including online transactions, illegal money transfers, clearing of accounts, western wire, and hacking into specific accounts.
This was confirmed by Ubah (2021), who stated in nairametrics that the Bank of Canada did a great job of listing all of the dangers that a central bank digital currency faces, ranging from the fact that the majority of thieves are unaware of how much money is kept in individual wallets.
They therefore aim to attack the largest financial institution, such as the largest cryptocurrency exchanges, banks, or even the central bank itself. As an illustration, let’s look at Bangladesh, where the national bank has been successfully breached by hackers from countries like North Korea.
According to Emmanuel (2021), numerous arguments have been put forth as to why central banks should think about creating their own digital currency, including a reduction in the cost of managing paper money,
the use of cutting-edge digital technologies, an improvement in the state of digital readiness, the maturation of identification registries, the promotion of financial inclusion, the simplification of tax and revenue administration, and many more.
It is crucial to consider the dangers associated with this endeavour notwithstanding the impenetrable measures that the CBN would put in place in good faith in its capacity as the host and custodian of the country’s financial services ecosystem.
None of those justifications took into account how this new trend would affect fraud and money laundering. The goal of this study is to examine how the e-Naira affects fraud and money laundering in Nigeria.
1.3 OBJECTIVES OF THE STUDY
This study’s main objective is to assess how e-Naira affects the detection of fraud and money laundering in Nigeria. In particular, the study aims to:
Analyse how users feel about the security of their e-wallet.
Analyse whether the e-Naira would lead to an increase in money fraud in Nigeria.
Find out if the development of the e-Naira would increase online transaction hacking.
Look into the capability of the e-Naira platform to monitor money laundering in Nigeria.
1.4 RESEARCH HYPOTHESES
The following tentative assertion serves as the basis for the research:
HO1: E-naira users have a poor opinion of the security of their e-wallets.
HO2: The use of e-Naira won’t lead to an increase in fraud in Nigeria.
HO3: The e-Naira platform is unable to monitor Nigerian money laundering.
1.5 SIGNIFICANCE OF THE STUDY
The study’s findings will be useful to policymakers, economic developers, and the general public. The study’s findings will inform policymakers and economic developers about the necessity of developing practical plans to guarantee the platform’s top-notch security and, if at all possible, make sure that all transactions carried out therein can be tracked for money laundering and fraud.
The study’s findings will be added to the body of current literature and used as a tool for scholars and students who wish to pursue future research in a similar topic.
1.6 SCOPE OF THE STUDY
This study’s focus is on how the e-Naira affects the detection of fraud and money laundering in Nigeria. The study will also show how concerned people are about the security of their e-wallets.
The investigation will also determine whether the implementation of the e-naira will provide fraudsters with yet another channel through which to spread account hacking and unlawful wiring and defraud the populace of their riches. However, the study is restricted to the Ikeja Area in Lagos State and is based on popular perception.
1.7 LIMITATIONS OF THE STUDY
While conducting the study, the researchers ran into some minor obstacles, just as in every human endeavour. The researcher had to choose from a small number of sample sizes because there was a limited amount of literature available on the topic because it is a new discourse.
As a result, the researcher had to spend more money and time looking for the necessary materials, literature, or information as well as conducting the data collection.
The researcher will also work on other scholarly projects while conducting this study. However, despite the limitations, all of these limitations were minimised to provide the best.
1.8 DEFINITION OF TERMS
Money Laundering: The process by which criminals conceal the original ownership and management of the proceeds of illicit activity by making those proceeds seem to have come from a legitimate source is known as money laundering.
Large sums of money earned by criminal activity, such as drug trafficking, are transformed into funds that come from lawful sources through the process of money laundering.
Digital currencies serve the same roles as traditional currencies, such as serving as a unit of account, a store of value, and a medium of exchange, but they exist solely as electronic data.
The first suggested digital currency by the CBN is called eNaira. The Central Bank of Nigeria has created the legal tender central bank digital currency (CBDC) known as the eNaira. The Naira can be used much like cash in its digital version.
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