work was designed to study fraud in the Nigerian banking industry. This study
titled: fraud in the Nigerian banking industry: causes, consequences and
solution. Case study of Union Bank of Nigeria Plc. The objective of the study
is to find more realistic ways and means to minimize the occurrence of frauds
in commercial banks. Relevant data for this research work were collected from
both primary and secondary source of data. A 'descriptive method was used for
this study. A sample size of 52 respondents were drawn out from the population
using questionnaire instrument. The statistical instrument used in testing the
validity of the hypothesis was chi-square. Among the major findings of the
study was that bank frauds are committed by bank staff in collaboration with
customers. Also, the study found' out that distress in the banking industry
does 'not has direct relationship with the occurrence of frauds in banks.
Furthermore, the result showed that good management control system, security and
inspection do not totally eliminate incidence of bank fraud. The research
therefore recommend that understand the causes, methods of fraud, bank must
understand the causes, methods and motivation for fraud. Thus, because the
causes of frauds and methods employed in fraud very with time, research on
fraud should be carried out regularly, to keep track of the development in the
TABLE OF CONTENTS
CHAPTER ONE: INTRODUCTION
of the Study
1. 2 Statement of the Problems
1.4 Objective of the Study
of the Study.
1.7 Scope and Limitations of the Study
of the Study
1.9 Organization of the Study
2.2 Banks and Banking Concept
2.3 The Structure of the Nigerian
2.4 Definition of Concept of
2.5 Classification and Types of
of Fraud in Banks in Nigerian Banking Industry
of Bank Frauds
2.8 Consequences of Bank Frauds
2.9 Measures for Controlling Fraud in Banks
3.1 Population of the Study
3.2 Sample Size
3.3 Data Collection and Description
3.4 Method of Data Analysis
Encountered and Limitation of Study
3.6 Restatement of Research
3.7 Restatement of Research
ANALYSIS AND INTERPRETATION
4.1 Analysis of Variables of
4.2 Analysis of Questionnaire
CONCLUSION AND RECOMMENDATIONS
OF THE STUDY
There appears to
be little about the fact that fraud in banks is a matter of the greatest
concern to bankers, the monetary/ political authorities and the generality of
Nigerians today. It is so for many reasons. The methods acquire sophistication
by the day. The size increases in geometric progression.
involved hitherto were among the respectable members of the church, the mosque,
the community. Also, the results" of the incidences are damaging. Frauds
lead to unwarranted losses for the banks and put the management and energies on
fraud prevention and detection. Equally importantly, every incidence of bank
fraud literally chips off a bit of the public's confidence in the orthodox
financial institutions that banks are, and delay or slowdown the full
development of banking habits in Nigeria.
Fraud in banks
contains, largely, experiences of practitioners in the banking industry, people
that have had to inevitably deal with the problem. It should therefore be a
very useful of information to bankers of all grades, to students and to all
interested in the minimization of fraud in our banks.
In view of
these, fraud is a number, one enemy to all concerned with the growth and
development of the financial industry. Any effort to fight this enemy is
therefore most desirable.
1. 2 STATEMENT OF THE PROBLEMS
Frauds are not
new in banks. They are as old as the industry itself. However, in recent times,
the rate and frequency at which they occur have been a cause of great concern
to management of all banks in Nigeria. Banks lose millions of naira in various
frauds yearly and despite concerted efforts, by individual bank management and
by the committee of Chief Inspectors on the one hand the Banker committee in
the other, the wave of frauds in banks has continued to be on the increase. The
attack on bank fraud by the fraudsters is as a result of the belief by many
Nigerians that the banking sector is the most profitable sector of the economy.
They believe that the banks make a lot of profit annually and are always
liquid. Consequently, any amount of financial loss to a bank will not
materially affect its existence. This is incorrect. The examination of the
account of some banks, will show that some banks cannot even fully provide for
loses sustained through fraud in their accounts.
The fear is now
common that the increasing wave of fraud in banks in recent years, if not
arrested may pose certain threat to the safety, survival and stability of
individual's banks and their performance. It also results in huge financial in
stability of individual banks and their performance. It also results in huge
financial losses to both the banks and their customers as, well as loses of
confidence in the affected banks, which eventually bring about their closure or
liquidation or acquisition.
In the light of
the foregoing, the following questions may be asked in this research work:
What is bank fraud and what are its venous nature,
characteristics and methodology?
Who and why does bank personnel commit fraud?
Are there indicators to predict the occurrence of banks
What are the opportunities (loopholes) in the management
control system, which encourage bank fraud?
To what extent would bank' fraud affects the bank in
particular and the economy at large?
What should be the role of bank examiner, the internal
auditors and the general public in fraud prevention, detection and prosecution?
The needs to
provide workable answers to this constitute the justification for the research
1.4 OBJECTIVE OF
has become a cankerworm that is eating deep into the system of the Nigeria
financial industry consequently bringing dents on the reputation of the banks
concerned arid reducing the level of confidence the public has in the entire banking
objective of this research work is to find more realistic ways and means to
minimize the occurrence of fraud, if not absolutely eradicating frauds in banks.
Other objectives of this research work are as follows:
• To identify the causes of and opportunities
(loopholes) for the perpetration of frauds in the Nigerian banking industry.
• To ascertain the extent of the effect or dangers
of fraud on the Nigerian banking industry.
• To identify the type of fraud and the
category or group of people' most especially within the banks who are likely
perpetrators of frauds in the banks.
• To identify measures that may be out in
place for the prevention and detection of frauds in banks.
• Recommendations need to be effectively implemented.
Therefore one of the objectives of this research work is to identify means
through which this could be done.
1.5 RESEARCH HYPOTHESES
are the research hypotheses that were verified, testing their creativeness as
assumption deduced with regard to the topic under review.
Ho: Good management control system, security and
inspection do not reduce the incidence of bank of frauds.
HA: Good management control system, security and
inspection do reduce the incidence of bank of frauds.
Ho: Experienced bankers are more unlikely to be
perpetrators of frauds in banks
HA: Experienced bankers are more likely to be
perpetrators of frauds in banks
Ho: That bank frauds are not committed by the
connivance of bank staff with customers
HA: That bank frauds are committed by the
connivance of bank staff with customers
Ho: Frauds in banks does not have direct
relationship with the occurrence of distress in the banking industry
HA: Frauds in banks do have direct relationship
with the occurrence of distress in the banking industry
1.6 SIGNIFICANCE OF THE STUDY.
has always been associated with some degree of fraud. This should not be
surprising in view of the fact that money and near monies is the stock
-in-trade in the banking industry. But this fact of association has
nevertheless not made the incidence of frauds in bank less worrisome to bankers.
In Nigeria, bankers are particularly concerned because frauds perpetration is
on the increase and continues to acquire greater sophistication. More
importantly, the news of frauds or attempted frauds dents the reputation of the
banks concerned and reduces the level of confidence the public has in the
entire banking system. All these have made the subject of frauds in banks a
topical one that is widely and frequently discussed by bankers, the monetary authorities
and the public at large in Nigeria today as it is, shall give full analysis and
attention in this research work.
work will be my modest contribution to the discussion on how to reduce the
incidence of frauds in our banks. It therefore commends these rich source of knowledge
about a nagging problem to the Nigeria reading public. This research work is
comprehensive and instructive analysis of the subject of fraud Nigeria banks.
expertise knowledge of banks frauds to banking practitioners particularly those
in charge of the inspection and the design of management control systems.
with the knowledge of the negative consequences (effects) of fraud in banks so
as to enable each staff to be watchdog of each other in its prevention.
work will hopefully be found useful by students, particularly of banking, the
law enforcement agents that have the task of prosecuting fraud cases and
practicing lawyers defending fraud cases.
authorities particularly the bank examiners win also find this research work of
By the time this
research work have been completed, the research finding and recommendations win
form a base that will be relied upon by other researchers who may wish to make
further inquiries into the causes, consequences and solutions to fraud in
Nigeria banking industry
1.7 SCOPE AND LIMITATIONS OF THE STUDY
The issue of
bank fraud is such a topical one and has been basis for debate. The scope,
therefore of this study was restricted to and concerned with those part of the
topic of this research work, with the banking sector as a whole was the main
focus of the study but particular attention was paid to UNION BANK OF NIGERIA
PLC as we consider: frauds in the Nigerian banking industry: causes, consequence
however, decided not to include some details due to some limitation forming
factors such as time, and hence, the research was restricted to certain area of
the research work at a time, and as a result of the time limit for the
completion of this research work, there was need or the researcher to be
confined to some aspects.
limitation was financial constraint and hence not all branches of UNION BANK OF
NIGERIA PLC nationwide were used as case study, but some of the branches
concentrated in Lagos.
1.8 METHODOLOGY OF THE STUDY
F or a good work
to be done with regards to this research work, the researcher shall gather
secondary data and information from various literature and works done on frauds
in banks as are available in textbooks, financial and banking journals and from
seminar papers delivered by eminent personalities in the financial sectors.
by means of questionnaire for quantitative analysis collected primary data. The
open and self- administered type of questionnaire shall be adopted and distributed
largely to staff (lower and higher cadre) of UNION BANK OF NIGERIA PLC and to
their customer. In all, about 60 (Sixty questionnaires shall be distributed.
shall be the statistical and quantitative analysis instrument to be used. The X2
text is an important extension of hypothesis testing and I used when it is
wished to compare an. actual, (observed) distribution with a hypothesis for the
expected distribution. It is often referred to as goodness of fit test. The
formula for the calculation of X2 is given as:
X2= ∑ (O-E)2
OF THE STUDY
shall consist of what the research work is all about. It shall form the
introduction to the research work. It shall consist of issues as justification
for the study, aims and objectives of the study and what is intended to be
covered in the other chapters.
consists of the framework of reference within whose context conclusion can be
evaluated. It shall be review of various literatures, in other words the
shall consist of the structural framework of the study.
shall consist of the methodology, which are the techniques and tools for
realizing or demonstrating the set objectives. In this chapter, the actual
analyses are carried out, the result pressed an interpretation made.
which is the last chapter shall consist of the summary of objectives. It shall
also consist of recommendation after which conclusions are drawn, and
suggestions for future work done.