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EFFECT OF FRAUD IN
BANK SECTOR IN NIGERIA
CHAPTER ONE
1.1
INTRODUCTION
The level of fraud in
the present day Nigeria has been on the high side. It has eaten into every
aspect of our life and economy to the extent that a three years old child talks
about Advance Fee Fraud Scheme (419). The economy has faced several challenges
today as a result of the billions of naira that have been lost due to the ugly
Monster (fraud). The term “fraud” has been defined in different ways by
different authors.
For the purpose of
this study, fraud can be viewed from the following scholars and experts. The
Oxford Advanced Learner’s Dictionary defined fraud as criminal deception.
Fagbemi (1986) defined it as the act of depriving a person dishonestly of
something which is his. In its lexical meaning, fraud is an act or course
of deception deliberately practised to gain unlawful or unfair advantage ;
deception directed to the detriment of another. Financial Institution Training
Centre (FITC). Helicon (2000) also defines “fraud in law as an act of
deception resulting in injury to another,”. For an action to constitute
frauds therefore, there must be a dishonest intention and the action must
be intended to benefit the perpetrator to the detriment of another person.
Going by the definition, fraud in the Nigerian economy
cannot be restricted
to banks alone. Although, fraud
cuts across all sectors of the economy but the size of an enterprises usually
determines the volume of fraud perpetrated. The problems such as; inadequate
manpower, poor internal control system and internal checks, inadequate
incentives and unsuitable legal framework for dealing with offenders,
downturn in economy, recognition being accorded
the wealthy people regardless
of their source of wealth
play a major role in the
perpetration of frauds.
The fear now is
threat of
which the devilish and unscrupulous act
will pose to the stability and survival of individual banks, financial institution
the performance of the industry and economy as whole. Fraud results in huge
financial losses to financial institutions and their customers, depletion of
shareholder funds and capital base as well as loss of confidence in financial
institutions.
1.2
STATEMENT OF PROBLEMS
The problems of this
research work will revolve around finding out the continuous causes of bank
frauds in virtually all banks and other financial institutions and its effect
on the economy. In spite of the banking reforms and corporate governance
instituted by the Central Bank of Nigeria (CBN), fraud in Nigerian banks has
remained an unavoidable problem and has not only become incessant but also has
been on the increased in the recent pasts. This hydra headed monster (fraud)
has negatively affected the profitability position of Nigerian banks and the
general confidence repose in the banking industry has become eroded.
Furthermore, the
research is aimed at checking the economy implication of these frauds to our
international relationship on global market economy.
1.3
OBJECTIVE OF THE STUDY
The general objective of the study is to highlight cause and various forms of
bank frauds, its effect and ways of preventing them. The specific objectives
which this study is designed to achieve include.
i.
To identify the causes of fraud in banks
ii.
To examine the various types of fraud perpetrated in banking.
iii.
To identify the various ways employed in defrauding banks.
iv.
To recommend measures aimed at preventing, controlling and detecting the
incidence of banks fraud.
1.4
RESEARCH QUESTIONS
The following
research question guided this study:
1.
In what ways does lack of effective internal control system lead to banking
fraud?
2.
In what ways does lack of enough motivation or incentive causes banking fraud?
3.
In what ways do societal values contribute to bank fraud?
4.
In what ways do bank frauds contribute to the dwindling economy fortune of our
country?
1.5
RESEARCH HYPOTHESES
For the purpose of this research work, the following assumptions are made;
Ho:
There
is no relationship between effective internal control and bank fraud.
Hi:
There is relationship between effective internal control and bank fraud.
Ho:
There is no relationship between motivation or incentive and bank fraud.
HI:
There is relationship between motivation or incentive and bank fraud.
Ho:
Societal values do not of have any effect on bank fraud.
Hi:
societal values do have effect on bank fraud
1.6
SCOPE OF THE RESEARCH
Bank
fraud and its effects on our economy, is an extensive topic that may involve
commercial banks and community banks. The researcher would like to touch
all aspects of banking activities, but for want of time and financial
constraints, this study focuses on the problem the researcher limits his work
to frauds in commercial banks especially Union Bank of Nigeria Plc Enugu.
Most importantly, records publications could be reached easily and frauds
traced in the commercial banks than other banks. Though the writer dwelled a
little into fraud in merchant banks emphasis is places more on commercial
banks.
1.7
SIGNIFICANCES OF THE STUDY
The Significance of this study can be seen from the key areas practical and
academic.
1.7.1 PRACTICAL
SIGNIFICANCE
The
study will be significant to, and practically assist in boarding the
understanding of the following:
v
The bank officials/management: it will enlighten then on key areas where
attention should be concentrated in order to minimize the perpetration of
fraud.
v
Bank customers¸ it will expose than to the knowledge of dealing with their bank
instruments such as cheques, deposit slips, ATM cards etc in order to reduce
the incidence of fraud in the banking industry.
In addition, this research will aid in enacting laws that will not only
be effective but also revealing ways of curtailing the social vice
fraud.
1.7.2 ACADEMIC
SIGNIFICANCE
From
academic stand point, the study will be significant in the following ways.
v
It will serve as a reference material for further studies by other researchers.
v
It will contribute to the enrichment of existing literatures on the effects of
bank fraud in nig economic.
v
It will proffer way (of interest to academics) based on empirical evidence on
how the cankerworm (fraud) can be minimized in the banking system.
and persons concerned to give out
information needed for this study will also pose some problem.
1.4
DEFINITION OF TERMS
FRAUD:- Frauds are acts of dishonesty deceit falsifications and
manipulations perpetrated to gain under monetary and or non-monetary benefits.
INTERNAL CONTROL:- This
refers to the whole system of control, financial and otherwise, established by
the management in order to carry on the business of the enterprise in an
orderly manner, safeguard its asset and secure as far as possible the accuracy
and reliability of its records.
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