Detection and prevention of financial fraud in Nigeria banks

  ABSTRACT Banks deal essentially in cash financial instruments and  other documents which are generally of a negotiable and easily transferable in nature. Hence it is very pertinent to say that the exposure of the banks to both internal and external fraud is very great. This practices is very 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 effect on banking and the entire economy. Recent study carried out by financial Institute training centre, Lagos showed that cause of fraud reported annually between 1989 and 1998 was about 500 and the annual average money involved in attempted fraud was thirty –six million naira while the annual average amount lost to banks and customers was sixteen million naira. It may not be said to be said to be an over statement that these figures may have risen geometrically upward afterwards when about seventy eight percent of our banking operation are going to the rural areas where poor Institutional and infrastructural factors militate against efficient and effective checks on the branches in these rural areas. Another problem facing our nations banking system is that of long queues. Frustration, delays and disappointment being experienced in the banking halls by customer whole either paying in or withdrawing their hard earned money.                        TABLE OF CONTENTS Title Page                                                                       Approval Page Certification Dedication Acknowledgement Abstract Table of Content CHAPTER ONE 1.0     Introduction                                                                             1 1.1     Background of the Study                                                         1 1.2     Statement of the Problem                                                         3 1.3     Purpose of Objective of the Study                                  5 1.4     Significance of the Study                                                6 1.5     Limitation of the Study                                                   7 References                                                                                8 CHAPTER TWO Review of Related Literature                                                    CHAPTER THREE 3.0   Research Design and Methodology 3.1   Source of Data (Secondary Sources Only) 3.2   Location of Data 3.3   Method of Data Collection (Literature work only) CHAPTER THREE Findings CHAPTER FIVE Recommendation and Conclusion                                                 CHAPTER ONE INTRODUCTION 1.1     BACKGROUND OF STUDY There has been no single accepted definition to the term “fraud”. Fraud in whatever forms is limitless on classification. This is why courts and writers on fraud shirk or try to escape away from giving a decisive definition. Notwithstanding, the varied meaning attached to the concept of financial fraud, the author addressed the subject with the following working definitions. Oxford and chamber dictionaries define fraud as a criminal deception, act of deceptive trick, cheating, swindling person or thing that decodes. Longman dictionary define fraud as “an act of deceitful behaviour for the purpose of gain which may be punishable by law”. In the mind of civil court of justice, fraud may be said to cover all acts, omission and concealments which involve a breach of legal or equitable duty, trust or confidence, justly reposed and injurious to another or by which an under influence or advantage is taken off. Bunmi Fagbenmi define banking fraud to mean an act or cause of deception deliberately practiced to gain unlawful or unfair advantage, such deception directed to the detriment of another. He goes further to define fraud to mean depriving a person dishonestly of something which his own. Having closely studied these approaches to definition of fraud especially from the banking perspective one may correctly see bank financial fraud as a deliberate act by an individual or group within or without the Nigeria banking system to cheat swindle, deceives or manipulates in order to disposes of their funds. Therefore fraud and forgeries in banking transaction can be perpetrated through falsification of entries in account of customers with a view to take advantage of the excess processed. Despite several definitions of frauds, the author believes that the ones so far given are rather appropriate, adequate, and inspiring for the purpose in which the research work intends to achieve. This is because. They contain the basic elements of fraud which include that:- (a)      There must be deceit or deception directed to the detriment of another or entity.  (b)     A false representation has been made knowingly or without belief in its truth or recklessly, carelessly, whether it be true or false. (c)      To obtain damages for deceit, it must be proved that the defendant intended that the plaintiff should act on it an suffered damages in consequence. The position of banking system in our economy cannot be over emphasized. They act as the “conduct pipe: through which all the financial transactions pass. However, fraud has proved a serious bottleneck to the proper functioning of the roles of the banking system to the Nigeria economy. People are beginning to get worried and sooner then later may loose confidence in our banking sector due to mainly the very increasing incidence of fraud in our today’s banks. Banks as the store house of the public funds and properties should be on trust not fraud. 1.2     STATEMENT OF PROBLEM The frequent case of financial fraud in many financial Institutions in our country is now taken as the utmost concern to financial experts and micro economists. This has also initiated the task of seeking solutions to eliminate its occurrences. To some banking experts, the issue of fraud is an internal vice in the Nigeria banking system. They argue on this because a good number of fraud occur among our banks without the knowledge of outsiders even where the public is aware it does not effect the rate at which customers withdraw or deposit money. These experts are inclined to believe this because the nation is under banked, the populace are at no option but to use the available banks like especially the foremost and well established bank like UBS PLC even if there are glaring inefficiencies in the operation in competence and laziness among most banks staff give birth to fraud. Fraud has paralyzed the roof, the foundation and credibility of our banking system. Just pick up any national daily or from police record and you will be alarmed at the extent and magnitudes of bank fraud in Nigeria banking system. Many banks have gone on distressed. Therefore the researcher is aiming at finding out if there is any significant effect or solution to financial fraud in Nigeria banking system which has to offer to these deficiencies aforementioned with special reference with UBA PLC station road, Enugu. In summary, the major problems of this study are follows:-           (a)      The incessant/consistent cases of financial fraud. (b)     Inleakness this has attributed to banking industry prior to the introduction of effective control of financial fraud. 1.3     PURPOSE/OBJECTIVE OF THE STUDY This research work is general set towards ascertaining the effects financial fraud have had on the Nigeria banking system or banking industry since its inception in the Nigeria industry. Furthermore, the study is:- (i)      To determine if any most of the bills the banking have in relationship with the financial fraud in banks and to what extent. (ii)     To examine the facts contained in the detection and prevention of financial fraud issue. (iii)    To research into the reasons why people involved in financial fraud. (iv)    To examine the various management and government controlling devices geared towards eliminating or checking financial fraud in our banking system. (v)     To diagonise the banking procedures with a view to fishing out loopholes inherent there in and suggesting ways of plugging them. (vi)    To recommend solutions that may help in checking financial fraud in our banking system. (vii)   To identify the problems banks face as a result of the introduction of financial fraud. 1.4     SIGNIFICANCE OF THE STUDY This study is intended to highlight the indispensable position of an auditor and those concern to work in an available financial houses like banks. This project will equally be of immense help to other establishment and organization both in public and private sector. The dive need to establish a viable internal audit unit as a means of internal control should not be over emphasized. It is hoped that the management of UBA PLC Station Road, Enugu, in particular should use the audit department (i.e. audit department and inspection). This department being the watch – dog of banks should be given move teeth to bite than more banking prospective investors, promoter, shareholder would find this study very useful. This will serve as an eye opener to them on want it takes to invest in banks. This will also help readers and these who may wish to make reference on the topic of study may be while undertaking similar research work. Government agencies can install adequate internal control measures to avert the incessant frauds and embezzlement rampant in financial houses ministries and parastals today. They should be able to understand what is fraud and where to audit how and why auditing and internal control system is an invertable ambient of the business system. 1.5     LIMITATIONS OF THE STUDY This research work on detection and prevention of financial fraud is with a particular reference, for the banks to adopt some control measures to check the high incidence of fraud facing them in their operations. The following measure may be of help to the banks in fraud minimization. They should adopt constant and consistent inspections of bank operations. These inspections should be carried out by qualified and experienced bank inspectors and auditor. REFERENCES Bumi Fagbemi (1993): Frauds and the Law the Nigeria Bank. Journal of the Institute of Banker. Get the Complete Project Material Now!!!