Human beings are often said to be the most difficult animal God created because it would always desire for something or conditions better than the one it find itself. The notion has proven itself to be true giving the incessant cases of financial frauds that have littered the history of human race.
Funny enough, fraud and other financial irregularities are on the increase in the banking institutions where money are supposed to be keep safe and free from harms and troubles.
This research work is therefore determined to access the impact of auditing fraud detection and control in the banking sector of Nigeria. In the cause of analysis and data presentation First bank Plc. Shall be used for better presentations.
From the study, such factors like poor staffing, poor remuneration, and weak internal control among other factors contributed immensely to the incidence of fraud in banks. The study revealed that the most effective way of preventing fraud in banks is through an effective in-built control mechanism. This internal control mechanism is designed in such a way to designate responsibilities so that a staff’s activities are checked by another which is in turn checked by a higher officer. This calls for a strong and independent inspection and audit department in every bank comprising of staff with impeccable integrity.
This study applied necessary data collection techniques such as questionnaires.
LIST OF TABLES
- Frauds in Nigerian banks (1999 – 2003)
- Is First bank Plc. often defrauded by fraudsters
- Are there adequate in-built control measures to check mate fraud
- Are members of staff often involved in fraudulent activities
- Are staff members adequately remunerated
- Does poor staffing contribute to fraud perpetration
- Are there enough punishment for staff who is involved in fraud
- Does government financial polices help to combat fraud
- Are staff members adequately exposed to workshop and seminars on fraud
- Does First bank Plc. banking method market vulnerable to fraud
- Is the management board of First bank Plc. efficient in fraud control
- Have First bank Plc. successfully recovered any money fraudulently withdrawn by fraudsters
TABLE OF CONTENTS
LIST OF TABLE
TABLE OF CONTENTS
- BACK OF THE STUDY
- STATEMENT OF PROBLEMS
- OBJECTIVES OF THE STUDY
- SCOPE OF THE STUDY
- RESEARCH QUESTIONS
- SIGNIFICANCE OF THE STUDY
- DEFINITION OF TERMS
- LITERATURE REVIEW
- THE CAUSES OF FRAUD IN BANKING SECTOR
- THE EFFECT OF FREQUENT FRAUD OCCURRENCE IN THE BANKING INDUSTRY
- THE RELATIONSHIP BETWEEN BANKING PRACTICES AND FRAUD PERPETRATION
- THE IMPACT OF BANKS AND GOVERNMENT’S EFFORT ON FRAUD ELIMINATION
2.5 DEFINITION OF FRAUD
- RESEARCH DESIGN
- AREA OF STUDY
- POPULATION OF STUDY
- SAMPLE AND SAMPLING PROCEDURE
- INSTRUMENT FOR DATA COLLECTION
- RELIABILITY OF THE RESEARCH INSTRUMENT
- VALIDITY OF THE RESEARCH INSTRUMENT
- METHOD OF ADMINISTRATION OF THE RESEARCH INSTRUMENT
- METHOD OF DATA ANALYSIS
4.0 DATA PRESENTATION AND RESULTS
- RESEARCH QUESTION 1
- RESEARCH QUESTION 2
- RESEARCH QUESTION 3
- RESEARCH QUESTION 4
- RESEARCH QUESTION 5
- RESEARCH QUESTION 6
- RESEARCH QUESTION 7
- RESEARCH QUESTION 8
- RESEARCH QUESTION 9
- RESEARCH QUESTION 10
- RESEARCH QUESTION 11
- DISCUSSION OF RESULTS
- IMPLICATIONS OF THE RESULTS
- SUGGESTIONS FOR FURTHER RESEARCH
- LIMITATION OF THE STUDY
1.1 BACKGROUND OF THE STUDY
Fraud is a `cankerworm’ that has eaten deep into the nation’s fabrics. It is visible in all the sectors of the economy. In the financial sector, fraud is an `offshoot’ of financial crimes which covers offences, which are securities, related and involves the movement, transfer or use of monetary instruments in circumstances, which render such acts unlawful. The above definition can be extended to include any dishonest, unethical or unprofessional conduct which results in financial loss to someone or institution for the benefit of another. Financial fraud include but are not limited to the following, cheque-kiting, loan fraud, advance fee fraud, securities fraud, account opening fraud, insider-dealing clearing fraud, computer-fraud, telex fraud and money laundering.
Fraud as stated earlier is not peculiar to the banking industry but cuts across other sectors of the economy. Frauds in banks are not new, in fact, it is as old as the industry itself. But in recent times, the practice has assumed an alarming proportion. Sometimes, the act is carried out by outsiders while in most cases there is a collaborated effort between outsiders and staff to perpetrate this financial crime.
Against this background, government in its effort to combat fraud and other financial crimes has set up various monitoring and control commissions such as the independent corrupt practices and other related offences commission (ICPC), which is the apex body, saddled with the responsibility of fighting corruption and other related offences. The ICPC was inaugurated on the 20th of September 2002. The act establishment this commission in section 3 provides for the independence of the commission and gives the chairman authority to rescue order for the control and general administration of the commission and financial crimes commission (EFCC) which was established in 2002. Another is the National Drug Law Enforcement Agency (NDLEA).
HISTORY OF FIRST BANK PLC
The Bank traces its history back to 1894 and the Bank of British West Africa. The bank originally served the British shipping and trading agencies in Nigeria. The founder, Alfred Lewis Jones, was a shipping magnate who originally had a monopoly on importing silver currency into West Africa through his Elder Dempstershipping company. According to its founder, without a bank, economies were reduced to using barter and a wide variety of mediums of exchange, leading to unsound practices. A bank could provide a secure home for deposits and also a uniform medium of exchange. The bank primarily financed foreign trade, but did little lending to indigenous Nigerians, who had little to offer as collateral for loans.
In 1957, Bank of British West Africa changed its name to Bank of West Africa (BWA). After Nigeria’s independence in 1960, the bank began to extend more credit to indigenous Nigerians. At the same time, citizens began to trust British banks since there was an ‘independent’ financial control mechanism and more citizens began to patronize the new Bank of West Africa.
In 1965, Standard Bank acquired Bank of West Africa and changed its acquisition’s name to Standard Bank of West Africa. In 1969, Standard Bank of West Africa incorporated its Nigerian operations under the name Standard Bank of Nigeria. In 1971, Standard Bank of Nigeria listed its shares on the Nigerian Stock Exchangeand placed 13% of its share capital with Nigerian investors. After the end of the Nigerian civil war, Nigeria’s military government sought to increase local control of the retail-banking sector. In response, now Standard Chartered Bank reduced its stake in Standard Bank Nigeria to 38%. Once it had lost majority control, Standard Chartered wished to signal that it was no longer responsible for the bank and the bank changed its name to First Bank of Nigeria in 1979. By then, the bank had re-organized and had more Nigerian directors than ever.
In 1982 First Bank opened a branch in London, that in 2002 it converted to a subsidiary, FBN Bank (UK). Its most recent international expansion was the opening in 2004 of a representative office in Johannesburg, South Africa. In 2005 it acquired MBC International Bank Ltd. and FBN (Merchant Bankers) Ltd. Paribas and a group of Nigerian investors had founded MBC in 1982 as a merchant bank; it had become a commercial bank in 2002.
In June 2009, Stephen Olabisi Onasanya was appointed Group Managing Director and Chief Executive Officer, replacing Sanusi Lamido Sanusi, who had been appointed governor of the Central Bank of Nigeria. Onasanya was formerly Executive Director of Banking Operations & Services.
1.2 STATEMENT OF PROBLEMS
For any solution to be preferred for a problem must be properly identified. Fraud in the banking sector is not committed by the system but people in the system. For fraud to be perpetrated, there are working conditions and practices that encourage it. Without stating these problems any effort at curbing fraud will amount to treating the wrong let. Against this background, the following will be pertinent to stated here
(i) The remote causes of fraud in the banking sector.
(ii) The frequency of fraud occurrence in the banking industry
(iii) The banking practices that encourage fraud.
(iv) Banks’ and government’s efforts aimed at curbing fraud.
1.3 OBJECTIVE OF THE STUDY
This study aims at achieving the following objectives:
(i) To determine the remote causes of fraud in the banking sector.
(ii) To determine the frequency of fraud occurrence in the banking industry.
(iii) To determine banking practices that encourages fraud.
(iv) To ascertain banks’ and government’s efforts aimed at curbing fraud.
1.4 SCOPE OF THE STUDY
Given the current travails of the banking sub-sector, the need to plug all areas of wastages, more than ever before, becomes compelling. Thus, fraud which has over the years constituted substantial drawn on the vaults of banks and other financial institutions, needs not only be detected on time, but must also be prevented and controlled. Hence, the importance of this research work, fraud prevention, detention and control in Nigeria banking industry.
1.5 RESEARCH QUESTIONS
- What are the remote causes of fraud in the banking sector?
- What is the frequency of fraud occurrence in the banking sector?
- To what extent does banking practices encourage fraud?
- What are the efforts of banks and government against fraud?
1.6 SIGNIFICANCE OF THE STUDY
This research title – fraud prevention, detection and control in Nigerian banking industry is timely and of great importance to the banking sector, the economy and the nation as a whole. Moreso, now that there are a lot of cases of distress in banks. This distress stem largely from fraudulent activities being perpetrated by bank officials, sometimes, in connivance with outsiders.
Revelations made by this research will help banks, financial institutions and other fraud-prone institutions curb the menace of fraud. This is because this study will identify the cause of fraud, and as well as proffer solutions to this cankerworm called fraud. The various types of frauds and ways to curb tem are also identified by this research work.
This research therefore is of great importance to every bank’s management that want reduce the incidence of fraud in their system to the barest minimum and increase the level of public trust.
In a nutshell, this study can be regarded as a blue print of solutions to frauds. Students studying accountancy and other finance related courses will find this study relevant especially on how to prevent fraud. It is also expected that this study will stimulate the interest of more students to further carry out research on this issue thereby widening the basis on which an opinion could be formed on this subject matter.
1.7 DEFINITION OF TERMS
Banking institutions are the institutions saddled with the responsibility of rendering financial services. These include any person or corporations that provide the minimum banking services and which is licensed as a bank by the federal government of Nigeria as a banking institution. Those minimum banking services include:
- Acceptance of deposits from customers
- Making payments locally and outside Nigeria.
- Granting loans and advances.
- Trading in securities.
- Clearing of cheques and similar instruments.
The level of fraud in the country today has assumed an unenviable height. It has eaten deep into the nation’s Fabrics that no sector is spared. It has over the time undergone some levels of refinement and sophistication. Fraud can summarily be described as an act carried out by individual in order to gain some advantages dishonestly. For an act to constitute fraud, there must be a deliberate intention to deceive and they must be intended to enrich the perpetrator dishonestly.
The term `financial crimes’ covers offences which are securities-related and involves the movement, transfer or use of monetary instruments in circumstances which render such act unlawful. In context of the on-going efforts to sensitize the financial services industry in Nigeria, the above definition has been extended to include any dishonest, unethical or unprofessional conduct which results in financial loss to some one or institution for the benefit of another.
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