ABSTRACT: Fraud is an awful phenomenon, which like a vein has invaded Nigeria banking industries and the society in general, and puts any organization that it comes into in a state of liquidation.This study highlights the bank fraud, extent of fraud in banks, effects of bank fraud, detection, and presentation and control measures adopted by management to check fraud incidents. This study highlights the nature and various types of fraud, causes of bank fraud, extent of fraud in banks, effects of bank fraud, detection, and presentation and control measures adopted by management to check fraud incidents.The purpose of this research work is to find out whether there is significance level of fraud in Nigerian banks, to know whether Nigerians practice, aid or abate fraud and to consider the adequacy of the internal control system in detecting and preventing fraud in the bank. Hypothesis were formulated and tested with chi-square and inference drawn there from. The collection includes a well-structured and easy to follow questionnaire. Primary data were collected through this medium from 30 respondents. The findings revealed that compensation of banking services and the maintenance of effective internal control mechanism has helped to reduce the incidence of fraudulent activities in the bank. In view of this, it is the recommendation that adequate internal control system should be maintained, effective fraud management, strict adherence of administrative management policies should be ensured to check and possibly eliminate fraud incidence in the bank.The detection and prevention of frauds should be elaborative effect between banks, their customers, the public and the government. Frauds in the banking system should as much as possible, be minimized as it kills the bank and destroys the economy of a nation. Finally, the research adduced that continuous vigilance should be the watch work if fraudulent practices are to be reduced and possibly eliminated in banking industry.
1.1 OBJECTIVES OF THE STUDY 3
2.1 CONCEPT OF FRAUD 14
BANKING INDUSTRY 35
OF FRAUD IN BANKING INDUSTRY 49
3.0 SUMMARY, CONCLUSION AND RECOMMENDATION
1.0 BACKGROUND OF THE STUDY
With an award match to becoming an industrialized nation, Nigeria is witnessing true emergence of human resources as professional, which made possible the establishment of service industries and other business organizations. This belief was rather so strong that the urge to provide financial services can no longer be overlooked. To accelerate economic growth and economic development both government and some banks, in addition to a few banks that were already into business to operate systematic financial services.
These banks employed young men and women, but like every aspect of human endeavour have their challenges. One of the major challenges facing the banking industry and indeed all industries is the incidence of fraud. Bakere (2002:1) observed that the incidence of frauds in banking industry has in the recent past post a very serious threat to the very existence of financial institutions and is a matter of serious concern to the regulatory authorities and the banking public. Despite the stringent measures put in place by monetary authorities and internal control measures to check the activities of fraudsters, frauds in the banks to be stated that available statistics reveal that thirty one banks reported that they experienced frauds and forgery cases for the period (January – March 2002).
Banks are institutions known to operate on the center-pin of public confidence. Today that concept no longer holds as bankers themselves either initiate frauds or partakers deeply in fraudulent activities against their banks (employers).
According to Nigerian Deposit Insurance Corporation (NDIC) Annual Reports (1999:9), most of those banks were run a ground by a few greedy directors and officials who perpetrated frauds and all kinds of unethical practices against their institutions. This is an aberration that continues to erode public confidence in banks.
This scenario has singularly contributed to the liquidation of many banks. Agbatya (1998:13) observed that one couldn’t avoid considering the fact that the distress in the banking industry was occasioned by fraud.
Now that cases of fraud have been established in the banks, the need therefore arise to find out problems associated with fraud, its impact on the macro-economy and how these problems are being tackled, hence the need for this study.
1.1 OBJECTIVES OF THE STUDY
The purpose of this study is aimed at exposing the various forms of fraud in financial institutions and the appropriate roles, which monetary authorities, Board of Directors, Management and indeed all shareholders should play to ensure total elimination of fraud or at least reduce the ugly trend to the barest minimum.
Furthermore, it was meant to:
1.2 STATEMENT OF RESEARCH PROBLEM
Generally speaking, movements in the economy of any nation result from the inter-play of money and other economic variables. In Nigeria, the impacts of money and banking have been the dominant factors determining macro-economic performance. Despite this unique position of banks between other sectors of the economy, banks (especially commercial banks) are faced with a good number of economic crises. Notably among the cases is fraud.
As a result there 0has been a lot of criticisms form the investing public about the non commitment and dedication to duty by Nigerian bankers. This stems fro the fact that distress in the banking industry originated fraud, which was occasioned by bankers.
Directors and management of banks are also criticized for their inability to direct and control men and materials effectively. Poor accounting or reconciliation procedures may give an employee the opportunity to spot a weakness and devise a plan to take advantage of it. This is due to the weakness of internal controls in a bank. Understanding what motivates these individuals and how they are able to rationalize their behaviour is key to preventing it. Furthermore, they are criticized for using their positions and authorities to defraud their institutions. Repeated appeals and warning from well-meaning individuals and government for a change of these negative tendencies to the positive have yielded little or no dividend.
Criticisms have not been directed to bankers, Board of Directors and management alone. Government and regulatory authorities are being criticized for appointing men of doubtful integrity to oversee the affairs of banks and failing in their statutory role of supervision. While fraud have been in vogue in the banking or financial institutions, the situation worsened when those who should monitor and control fraudulent practices became the offenders. This is why the failed bank decree on frauds was targeted at the industry.
Many banks became technically distressed the number increasing from eight (8) in 1990 to forty two (42) in 1994 and fifty two (52) by the end of 2002. this is due to ineffective management and it has caused this menace to be inevitable in every banking industry or financial institution.
Many concerned citizens see these solutions as contributing to the poor performance of banks as evidence by distress in the banking system.
It is in recognition of these problems that this study seeks to investigate into the problems that this study seeks to investigate into the problem associated with fraud in the banking industry and to rectify this ugly trend to enhance effective financial system.
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