Interswitch, the African payments and infrastructure giant, has lost as much as ₦30 billion after a system glitch allowed some merchants to fraudulently file and receive chargebacks, according to court documents seen by TechCabal and three people with direct knowledge of the situation. The company is now attempting to recover the funds through legal action, and it has reported the fraud to the Economic and Financial Crimes Commission (EFCC), Nigeria’s anti-money laundering agency. So far, Interswitch has recovered a little over ₦10 billion, according to one person with knowledge of the matter. Interswitch declined to comment for this story.
The court documents showed that Interswitch filed a motion at the courts on the suspected bank accounts. The payments giant has also requested that 54 banks place restrictions on hundreds of suspected bank accounts until the investigation and recovery process is complete, said a lawyer at a top Nigerian law firm with knowledge of the ongoing case. The chargeback fraud dates back several years, two sources with knowledge of the situation told TechCabal, but they declined to share a specific timeline. The current incident, however, is directly linked to a few former and current Interswitch employees who likely exploited vulnerabilities in the company’s system, the sources said. At least one person has been arrested in connection with the incident, a source also said.
Nigeria’s financial services industry has seen an increase in incidents of fraud in the last four years. Nigerian financial institutions have reported ₦159 billion ($201.5 million) lost to fraud cases since 2020, according to the Financial Institutions Training Centre (FITC).