THE IMPACT OF ENAIRA IN TRACKING MONEY LAUNDERING AND FRAUD IN NIGERIA

CHAPTER ONE

INTRODUCTION

1.1 Background of the study

The promotion of cashless policies has become a driving factor for global economies to investigate currency digitalization as it fast tracks online transactions. Various uses of e-transaction, including as e-banking, e-ordering, and online publishing/online retailing, are constantly influencing trends and possibilities for business over the Internet. A more developed and mature electronic environment is important in e-transaction because it encourages a shift from traditional modes of payment (such as cash, checks, or any other form of paper-based legal tender) to electronic alternatives (such as e-tranzact, Western Union money transfer, and pocketmonie), effectively closing the e-commerce loop (Bickersteth, 2005). A commercial service that uses information and communications technology like as integrated circuit (IC) cards, encryption, and telecommunications networks is known as an electronic transaction. E-transaction technologies are required in order to adapt to fundamental shifts in socioeconomic patterns. The transaction system is a set of institutions, tools, rules, processes, standards, and technicalities that impact the transfer of monetary value between all parties hence has ushered some economies into digitization of currency.

Digital currencies, according to Gilbert, Scott, and Loi, Hio. (2018), have qualities comparable to traditional currencies but, unlike printed banknotes or minted coins, rarely have a physical presence. Due to the lack of a physical form, online transactions are nearly instantaneous, and the costs of shipping cash and coins are eliminated. As a result, digital currencies will continue to be helpful for inter-party transactions as long since both sides recognize the currency's legality, as they provide the benefit of quick settlement, especially in online communities. Despite the fact that cryptocurrency is the most popular form of digital currency, there are thousands of them in the modern world, each of which operates and enjoys security thanks to the mutually adopted encryption codes by the parties in such transactions, especially since most governments around the world have shied away from conferring any form of endorsement or legitimacy on transactions conducted through such channels.

Taking advantage of fast technical advancement and financial market growth, international economies have begun to transition from paper to digital money, with Nigeria not far behind. According to Abdulkareem M. (2021), central banks around the world have been delicately working on their digital currency by gradually weaning themselves off rapidly-declining cash payments, which is why the Central Bank of Nigeria joined the fray so that Nigeria is not left in the lurch, which led to the launch of her e-Naira, which comes after instructing banks to close cryptocurrency and crypto-related accounts in February 2021. (premiumtimesng.com). Although the introduction of the e-naira is innovative, Ubah Jeremiah Ifeanyi (2021) emphasized that a weak transaction system can have a significant impact on an economy's stability and development capacity; its failures can result in inefficient use of financial resources, inequitable risk-sharing among agents, actual losses for participants, money laundering, fraud, and a loss of confidence in the financial system and in the use of money. He addedd that digital currencies are convenient devices for money laundering — the crime of concealing illegitimate riches by shifting it – due to their decentralization and relative secrecy.

1.2 Statement of the problem 

The paper naira in Nigeria has experienced a major foreign currency problem prior to the introduction of the electronic naira, and the naira's rate of depreciation caused significant concern among residents, prompting the need to test an alternate legal tender (Ubah, 2021). Furthermore, as the CBN stated earlier this year 2021, cryptocurrency is forbidden, requiring the country's currency to be converted from paper to electronic.

Following on from the launch of the e-Naira, a  publication on Daily Trust (2021), revealed that the general public is beginning to wonder about the security of this new digital money and whether or not it is subject to hackers and scammers. Because of the high prevalence of fraudulent activities in Nigeria, such as online transactions, illicit money transfers, clearing of accounts, western wire, and hacking into individual accounts, people are concerned about the protection of their future wallet. This was reinforced when Ubah (2021) wrote in nairametrics that the Bank of Canada did a fantastic job of enumerating all of the risks that a central bank digital currency confronts, ranging from the fact that most thieves are ignorant of how much money is held in individual wallets. As a result, they seek to target the greatest pool of money, such as major cryptocurrency exchanges, banks, or even the central bank itself. Using Bangladesh as an example, hackers from nations such as North Korea have successfully hacked into the country's central bank.

Many reasons have been advanced as to why central banks are considering issuing their own digital currency, according to Emmanuel (2021), such as lowering the cost of managing paper currency, leveraging new emerging digital technologies, improving the digital readiness landscape, maturing identification registries, driving financial inclusion, simplifying tax and revenue administration, and so on. However, despite the foolproof safeguards that the CBN will implement in good faith as the host and custodian of the nation's financial services ecosystem, it is important to assess the risks involved in this venture. None of those reasons has considered the implications of this new development on money laundering and fraud. As a result, the purpose of this study is to look at the influence of the e-Naira on money laundering and fraud in Nigeria.

1.3  Objective of the study

The broad focus of this study is to examine the impact of e-Naira on tracking money laundering and fraud in Nigeria. Specifically the study seeks to:

1. Examine the perception of users on  the security of their e-wallet.

2. Determine if the introduction of e-Naira will increase money fraud rate in Nigeria.

3. Ascertain if the invention of e-Naira will heighten hacking of online transaction.

4. Investigate if the e-Naira platform has the capacity to track money laundering in Nigeria

1.4  Research Hypothesis

The research is guided by the following tentative statement:

HO1: The perception of e-naira users on  the security of their e-wallet is negative.

HO2: The introduction of e-Naira will not  increase fraud rate in Nigeria.

HO3: e-Naira platform has no capacity to track money laundering in Nigeria.

1.5 Significance of the study

Findings from the study will be relevant to economic developers, policy makers,  and the public users. To policy makers and economic developers, the result of the study will enlighten them on the need to come up with meaningful strategies to ensure topnotch security of the platform and all transactions that would be performed thereof if possible ensure that the platform is capable of tracking money laundering and fraud. The result of from the study will add to the existing body of literature and serve as reference tool for both scholars and student who wishes to conduct further studies in related field.

1.6  Scope of the study

The scope of this study borders on the impact of e-Naira on tracking money laundering and fraud in Nigeria. The study would further unveil the anxiety users exhibit on the safety of their e-wallet. Furthemore the study will ascertain if the introduction of e-naira will be another avenue fraudsters will propagate account hacking and illegal wiring ripping the masses of their wealth. However the study is base on public perception and is delimited to Ikeja Area in Lagos State.

1.7 Limitation Of The Study

Like in every human endeavour, the researchers encountered slight constraints while carrying out the study. The significant constraint was the scanty literature on the subject owing that it is a new discourse thus the researcher incurred more financial expenses and much time was required in sourcing for the relevant materials, literature, or information and in the process of data collection, which is why the researcher resorted to a limited choice of sample size. Additionally, the researcher will simultaneously engage in this study with other academic work. However in spite of the constraint all these constraint were downplayed to give the best.

1.8 Definition of terms

Money Laundering: Money laundering is the generic term used to describe the process by which criminals disguise the original ownership and control of the proceeds of criminal conduct by making such proceeds appear to have derived from a legitimate source. Money laundering is the process of changing large amounts of money obtained from crimes, such as drug trafficking, into origination from a legitimate source 

Digital Currency: Digital currencies are monies that exist not in physical form but only as electronic data, but perform the basic functions of money being unit of account, store of value and means of exchange.

eNaira: eNaira is the name given to the CBN's first proposed digital currency. eNaira is a central bank digital currency (CBDC) issued by the Central Bank of Nigeria as a legal tender. It is the digital form of the Naira and will be used just like cash.