FRAUD ELIMINATION IN NIGERIAN BANKING INDUSTRY

By

NWOBI CHIKA .P

Presented To

Department of Accountancy

ABSTRACT

Bank deals mostly in cash, financial instrument which are generally of a negotiable and easily transferable nature. Hence, it is very imperative to say that the exposure of Banks to both internal and external fraud is very great. This pradice always common to areas involving cash, cheques, and fund transfer, operations.

Much research and thought are increasingly being directed towards the study of the causes of fraud in banks because of its effects on banking and the entire economy.

In the past, study carried out by financial institutions training center, Lagos showed that causes of fraud reported annually between 1996 - 2000 was about 500 and annual average money involved in attempted fraud was thirty - three million naira.

Chapter one of this work deals with the introduction of what is all about

Chapter two of this work did an analysis of financial fraud by examining the methods uses by fraudsters in defrauding the banking industries. It established that falsification of accounts and forged cheques and signatures ranked highest and emans of perpetrating fraud.

And examination of categories of persons involved on the perpetration of fraud reveals that banks staffs are the majority.

It also discussed the technique for the elimination of frauds which includes:

· The adoption of constant and consistent inspection of banks operation.

· Organisation of seminars, workshops symposis etc. on fraud control for this employees.

Government should raise an eyebrow and at the same time endeavour to eradicate the end for instance the C.B.N act of 1958. Banking act 1969 and law of forgeries with their subsequent amendment is authentic to constitute adequate ways of eliminating fraud.

For instance, S.29 of 1969 Banking act stipulates, "any director of employee of a licensed bank or other person receiving remuneration from such licensed Bank or ask or agree to receive any gift, commission, emoluments, services, gratuity, money property or things of value for his/her personal benefits or advantage or to that of any of higher relation from any person other than from the bank for permitting any to withdraw any account will be guilty of offence and shall be liable for imprisonment not exceeding (3) years or fine of not more than N2000.

Moreover, government have to ensure that police and legal authorities are very serious in the discharging of their duties and ensure that fraudsters are given adequate punishment.

Hence one cannot say who and who is a fraudster by facial looking what it means in effect is that every new employee must be forced to give time background information of themselves while dealing with recruitment form.

Finally, Banks should endeavour to go into computer system to ensure that the incidence of fraud is eliminated.

TABLE OF CONTENT

COVER PAGE I

TITLE PAGE II

APPROVAL PAGE III

DEDICATION IV

ACKNOWLEDGEMENT V

ABSTRACT VII

TABLE OF CONTENT XI

CHAPTER ONE

1.0 INTRODUCTION 1

1.1 Background of the study 1

1.2 Statement of problem 4

1.3 Significance of the study 5

1.4 Scope and limitation of the study 5

CHAPTER TWO

2.0 LITERATURE REVIEW 7

2.1 Who are bank fraudsters 7

2.2 Fraud and fraudulent practice and

banking service 10

2.3 The legal frame - work and fraudulent practice 11

2.4 Reported cases of fraud 14

2.5 Types of fraud 18

2.6 Causes of frauds 18

2.7 Detection of frauds 21

2.8 Elimination and prevention of frauds 23

CHAPTER THREE

3.0 SUMMARY OF FINDINGS,

CONCLUSION AND RECOMMENDATION 25

3.1 Summary of findings 25

3.2 Conclusion 26

3.3 Recommendation 27

BIBLIOGRAPHY 30

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY.

Fraud has no definite accepted definition and it is limitless in classification. No wonder why house of Lord and writers of fraud always gives way from giving a decisive definition to it. But it is very important to look into other writers just to see how they give their own definition of fraud.

Oxford dictionary define fraud as the action or an instance of deceiving somebody in order to make more money or obtain goods illegally. Long-man dictionary also says that it is an act of deceitful behaviour for the purpose of gain which may be punishable by law. house of lords also says that it involves 'all acts, commission and concealment which involves a breach of legal or equitable duty cost, or confidence, justly responded and are injurious to another or by which an undue influence or advantage is taken.

J.C. Ezeh in his look principles and technique of auditing define fraud as an irregularities which is refers to intentional distortions of financial statements, of assets, which involve the use of criminal deception to obtain an unjust or illegal advantage.

Bunon Fagbeni on citing the dictionary of Banking by feiry define fraud as "Act of depriving a person dishonestly of something which is his or would or might be, but for the perpetration of the fraud be entitled.

1. Fatads M.A. Fraud, Banks way out of fraud daily time June 26 w986 p 13.

2. Paul Proctor, fraud, long-man dictionary of contemporary English (Essence, England, long-man group ltd 1978) P. 441.

3. Dennis Lane Mcdonel; John George Monroc, Kerr on the law of fraud and mistake (London sweet and Lexwell ltd. 1952) P. 1 -3)

4. Bummi Fegbemi, fraud and the law, the Nierian Banker, Journal of the institute of Bank (Vol. 6 No. 1. 1990) P. 13.

And also Dr. John Orji in his book element of Banking defined fraud as a conscious as deliberate effort aimed at the detriment of another person who is the rightful owner of the fund.

The fundamental of Banking industry in the current Nigerian economy can never been over emphasized. The banking industried, the central bank of Nigeria (CBN), the commercial banks, development banks, the merchant banks etc.

Occupy and indispensable position in the economic activities of this country. They are the media of transactions between the user and owners of funds. They are the large pipe (conduct) though which all financial transaction pass. This financial intermediation of our Banking system has put it as a pirot upon which other business activities resolve. It is known that the economy depends solely on the effectiveness and efficiency of the Banking industry.

However, fraud has firmly proved a very serious bottleneck to the proper functioning of the Banking role in the Nigerian economy with the name fraud people in due course may get worried and loose confidence in the Banking sector simply because of the rapid increase of the incidence.

Bank being a store house for public funds and properties should be built on trust and not on fraud.

1.2 STATEMENT OF THE STUDY

This research work is set to achieve the following objectives:

A. To verify why people involve in fraud.

B. To determine the ills the Banks have in relationship with the fraud and to what extent.

C. To diagnose the Banking procedure with a view to fight out loopholes inherent there and suggest ways of plugging them.

D. To determine or examine the various management and government efforts towards eliminating or checking fraud on the Banking industry.

E. To recommend solution(s) that may be helpful to the checking of the fraudulent activities in the Nigeria Banking industry.

1.3 SIGNIFICANCE OF THE STUDY

The topic "fraud elimination in Nigerian Banking Industries" is of significance to individuals, groups of individuals, schools, states and the Nation at large especially to the student of accountancy.

This is for the fact that the topic provides rooms for research work before students of accountancy throughout the federation and to any other related bodies on the techniques, they will have to apply while discharging their duties to achieve a lasting and desired end.

1.4 SCOPES AND LIMITATIONS OF THE STUDY

This research work met a lot of difficulties firstly, top officials of the Banks were reluctant to give away reluctant statistical data on fraud that occurred in their organization. They did not however deny over being victims of fraud.

They refused to part with such vital information because:

1. Such data on fraud is an official secret of the bank and should not be made public.

2. To disclose such official data will erode public confidence deposed in them.

3. That no bank like its completions to know how much it looses annually thought fraud, because it serves as parameter to measure internal control efficiency with the above structural limitation, it is found extremely obtained from one banking industry to analyse incidence of fraud in our Banks.