EFCC warns banks against unsecured lending, flags insider abuse risks

The Economic and Financial Crimes Commission (EFCC) has cautioned Nigerian banks against granting loans without credible collateral.

It warned that such practices expose financial institutions to insider abuse and rising non-performing loans.

The warning was issued by Ola Olukoyede,  EFCC Chairman, during a meeting with Mufutau Abiola, Chief Audit Executive of First Bank of Nigeria Plc,  who led a delegation on a courtesy visit to the Commission’s Lagos Zonal Directorate 2 in Ikoyi.

Represented by Bawa  Kaltungo, Acting Zonal Director, Assistant Commander of the EFCC, Olukoyede raised concerns about what he described as flawed lending practices within the banking sector, particularly loans backed solely by personal guarantees.

“We have issues with banks’ mode of giving loans. The process often shows insider abuse,” he said, stressing that reliance on the guarantees of top executives does not constitute adequate security.

The EFCC boss warned that such “top-down loans”,  often approved based on internal influence rather than verifiable collateral, put depositors’ funds at significant risk and contribute to the growing burden of non-performing loans across the industry.

He emphasised that banks, as custodians of public funds, must ensure that all credit facilities are backed by tangible and verifiable collateral.

“You cannot give a loan based solely on the personal guarantee of the Chief Executive. This is not security. Banks must not issue loans without verifiable collateral,” he said.

He added that proper collateralisation would significantly reduce loan defaults.

Olukoyede further urged financial institutions to strengthen their due diligence processes, noting that even when such responsibilities are outsourced, accountability must be clearly defined.

“Even in situations where you outsource due diligence, there must be a clause of liability,” he stated.

The EFCC chairman also called for stronger cooperation between banks and law enforcement agencies in tackling financial crimes.

He urged banks to promptly release staff members when requested for investigations, especially in cases involving suspected insider collusion.

“When we invite your staff, particularly where insider connivance is suspected, you must release them so we can jointly fight economic and financial crimes,” he said.

He also said that the Commission may escalate cases to international security agencies when necessary.

In his remarks, Abiola said the visit was aimed at reinforcing collaboration between First Bank and the EFCC.

He commended the Commission for its engagement and appealed for expedited handling of investigations involving the bank’s personnel.

He also disclosed that the bank has established a dedicated team to respond to EFCC requests, underscoring its commitment to regulatory compliance and cooperation in combating financial crimes.