FRAUD DETECTION AND PREVENTION IN BANKING INDUSTRY IN NIGERIA

CHAPTER ONE

INTRODUCTION

1.1    BACKGROUND OF THE STUDY

Fraud is a phenomenon, which is complex in nature. Given the current travails of the banking sub sector, the need to block all leakages leading to the loss of fund, more than ever before becomes compelling. The fraud which has over the years constituted substantial drain on the vaults of banks and other financial institutions, need not only to be detected on time but must be prevented and controlled.

One of the best ways of carrying out this, is to detect and control the dangers posed by fraud on the economy and the banking industry in particular.

The various interest groups comprising the shareholders, creditors, depositors, government and the public are not only interested in the financial statement of a bank, but very much interested in how the management has managed the fund entrusted to their care.  

One of such internal control measures is the inspectorate division of any bank. This is purely a management technique which operates by appraising all activities of the organisation with a view to assisting management in attain the desire goals and objectives both efficiently and effectively.

It is on record that the Nigerian Banking industry has spent thousands of naira in terms of their deposits, yet it is rather disheartening that all their efforts are being thwarted by sophisticated fraud attempts.

It is worthy to note that in the bank efforts in addressing this knotty issue of fraud millions of naira are being lost to fraud syndicates that have developed efficient and sophisticated. With the bankdrop, this research will appraise the internal control systems put in Afribank Nigeria Plc now Main street with the twin aim of detecting and controlling incidence of fraud and avoiding receipt of laundered money.           

1.2    STATEMENT OF THE PROBLEM

This study is to find out the problem encountered in fraud detecting and prevention in Banking Industry in Nigeria:

The internal control put in place by bank management sometimes are not strictly adhered to.

Fraudulent act by bank officials and customers is another problem facing banks in West Africa. So many banks have gone into liquidation because of the frauds are not discovered.

1.3    PURPOSE OF THE STUDY

            The purpose of this research work is to disclose the various ways and methods through which frauds are perpetrated. This study was therefore carried out for the following reasons:

i.              To identify the various types of fraud perpetrated in the banking industry.

ii.            To examine the relationship between fraud rate and total deposit size and the effect of fraud on the banking industry.

iii.           To evaluate the relevance and adequacy of internal control measures in detecting and controlling fraud.

iv.           To provide solutions towards reducing the incidence of bank fraud so as to promote safe and sound banking practices thereby protecting depositions fraud.

1.4    SIGNIFICANCE OF THE STUDY

            This project will be found interesting, educative and informative by several interest groups based on the fact that efforts are based on data collected to make this research work a laudable one. This study will contribute to knowledge in that it will fill a gap as per the importance of fraud control measures. This research is most timely because it will serve as a resource material and knowledge reservoir for bank management most especially in their recent campaign for the determination of the sources of customers fund.

            This research will also help the potential investors to know the type of bank they are to invest in and also help the depositors in determining the security of their fund.      

1.5    RESEARCH QUESTIONS

i.              What are the causes of fraud in Banking industry?

ii.            How can internal control measures be effective in detecting incidence of fraud?

iii.           What are the control measures put in place to detect fraud in the bank?

iv.           What are the relationship between professionalism and incidence of fraud?

v.            To what  extent has the various internal control measure prevent incidence of fraud?

1.6    DELIMITATION OF THE STUDY

            The research work will be concerned with the fraud detection and prevention in Banking industry in Nigeria in Afribank Pcl now Main street.

1.7    LIMITATION OF THE STUDY

            This study is limited by lack of funds available to support the research work shortage of time available for the study and in adequate materials.

1.8    DEFINITION OF TERMS

FRAUD: It can be defined as conscious premeditated action of a person or group of person with intention of altering the truth and or fact for selfish personal monetary gains.

 INTERBAL CONTROL SYSTEM: Is the examination and evaluation of the adequate and effectiveness of the management control systems provided of the management control systems provided by the enterprise to direct its activities in accordance with the organisation policies and plans.  

FORGERY: Doing a thing fraudulently or with intent to deceive and by means of such decent to obtain some advantage for himself of another or to cause loss to any other person.

SHAREHOLDER: Someone who has contributed some amount to a business ventures inform of equity which qualify him to be the owner of the company.

REMUNERATION: Reward, pay for services rendered.

CHEQUE: Written order to a bank, to pay the stated sum from drawer’s account to a bearer or order of named person.

FORGED CHEQUE: A written instrument issued with an international act to defraud the bank.

DORMANT ACCOUNT: An account where dormant customers balance are kept.

CALL-ORDER: daily checking of day’s work