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FRAUD
PREVENTION AND CONTROL IN BANKING SYSTEM
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Banking system in our economy is a very vital
sector and their position in our economy can not be over emphasized. The banking system in Nigeria was fashioned
along with that of Britain the banking system act as financial intermediate for
funds between the deficit and surplus sector of the Nigeria economy.
Nigeria banking sector is made up of the
central bank of Nigeria (CBN) commercial banks, merchant bank, development bank
and specialized banks. This banks deal on various financial instruments and
development there are transferable and desirable in nature. Not withstanding,
the recent incident of fraud and forgeries tend to pose a serious bottle neck
to proper functioning of the banking system, thereby incensing the association
risk and business system loss report early.
The oxford dictionaries defined fraud as
criminal deception deceptive tricks cheating swindling but Longman
dictionaries’ prefers to defined fraud from the view point, fraud in fact and
fraud in equality.
According to
Okezie (1999) 9.476 frauds involves the use of deception to obtain an unjust or
illegal financial advantages or also CBN banking supervision annual report 1998
defined fraud as involving the willful misinterpretation, the deliberate
concealment of material fact or the purpose of inducing another person to do
something. Poss. J.A (1990) P.99 also defined fraud as a legal term for a
purposeful deception that result in financial loss to another.
However, an
over view of event in the law few years not helping matters at all. In this
part of the world, fraud and person with questionable character are applauded
and honored with chieftaincy titles and can not fight this epidemic instead,
more person grow for the act daily. Frauds generally, are motivated by greed.
This is true because the rise in the activities of fraudsters tend to respond
due to the desire of wealth and the intention to receive and obtain benefit at
the detriment of another person
A recent survey by financial institutions
forms the major part and plays the major role (Ngwu, 2012). The size of an
enterprise usually determines the size of fraud perpetrated in it, the banks
are the most victimized as it has leads to many bank failures in Nigeria in
particular and the entire globe in Nigeria.
Going by
this backdrop, the problem now is how to effectively monitor activities of
these fraud, which seen to be matching their skill with rapid development in
the system. Fraud has been viewed as inherent in nature of banking operations
still it can be prevented or reduced to the bearest minimum. However, the
report of December 2002 prepare by the financial institution investigated (that
in the fourth and also affect the economic growth in Nigeria) quarter, 36%m of
the banks that rendered returns repeated, experienced one forgery and fraud or
other of the total of 176 cases. And amount involved in the case was N 802.07
million
On the forgoing, I wish to adopt chi-square
technique and to analyse the report of data collected from the three selected
bank visited for my study.
1.2
STATEMENT OF THE PROBLEM
Many banks today have suffered a great
financial loss in the end of numerous financial transaction and unsecure loan.
Fraud has become sophisticated as to make a forged cheque look good for the
owner to confirm it was his own signature, frequent occurrence of fraud
ultimately distracts the attention of the management and leads to increased
running cost. However, the major problem face in this study is that
Fraud brings about
unwanted
losses for bank
and equally put the
management on a confused
state of mind
and also effects the
economic growth
of Nigeria while
spending hard earned control.
Any case of
bank fraud clips of a bit of public truth in financial institution and as well,
so down the development of banking habits. Moreover, it can easily be noticed
that if nothing is done to control these ugly incidence, sooner than letter
fraud could lead to total collapse of the economy as a whole and the wind up of
bank if care if were not taken
1.3 OBJECTIVE OF THE STUDY
Having successfully indicated the numerous
problems obtained on finance fraud in the Nigeria banking system, the main
objectives in caring out this research work will now be stated.
I. To study critically how
fraud in banks could be prevented and controlled.
II. To evaluate the easiest
way ration of fraud and other fraud committed could be electronically captured.
III. Ways to reduce the
spread of fraud in our banking system, through effective monitoring control
procedure and efficient monitoring electronic transaction until properly
executed.
1.4 RESEARCH QUESTION
Considering the importance of this study,
it has become imperative for the researcher to postulate the following
question.
I. Is it true that fraud
is inherent in banking operation?
II. Does fraud have any impact on the
bank?
III. Why is it that it takes
months for fraud to be dictated?
1.5 RESEARCH HYPOTHESIS
The research on fraud prevention and control
in the banking system is a fact finding one therefore, the research hypothesis
did not just emerge from the blue was draw from the nature of the problem at
hand for emphasis purpose, it is described as a tentative statement about the
variable stated below. Therefore the hypotheses are as follows:
Ho1:
financial fraud in banking system is difficult to be prevented and controlled
in banking system.
Ho2: bank
fraud has negative effect on the profitability of the banking system.
Ho2:Bank
fraud has significant impact on depositors confidence in banks
Ho1:Bank
fraud has no significant impact on
depositors confidence in banks
1.6 SIGNINFICANCE OF THE STUDY
Although this research work is not exhaustive
one because of the non availability of some important information and limited
time all part of this work is to financial institution.
Moreover, this study is prepared for these who
may be interested or willing in carrying out further investigation on fraud
with special reference to financial institutions. However the banks will
benefit greatly from this research work in preventing and controlling of frauds
in their banks and this they cab achieve by adopting and implanting the
different ways suggested by this study in management control system.
1.7 SCOPE OF
THE STUDY
Due to
financial and time constraints usually associated with studies of this nature,
the scope of this study is Access bank
plc, Spring bank plc and first bank plc; all are selected banks in Nigeria.
1.8
LIMITATION OF THE STUDY
Finance was
one of the major constraints that limited the work intended to be undertaken by
the researcher. The fact that there is inadequate fraud at my disposal
accounted for the un-intensive fact finding in the course of my study.
Time
constraints are also another factor that limited this research work. The
purpose of this study is so small but above all the result of this work falls
above the mediocrity.
Finally the
unco-operative attitude of staff of the selected banks become problematic, as
three was no access to source for information required for the study.
1.9
DEFINITION OF TERMS
Control:
Control in the context implies taken to minimize occurrences such as fraud.
Document: A
document according to 5.467 of the commercial code include, register, and paper
paramount or other material whatsoever used for writing, printing , which is
marked with and letter or any letter or any other signs capable of conveying
definite meaning to persons conversant with them but does include trademarks on
goods. A document is not only in writing papers and in voucher, cheques etc but
include writing based on words stone or metal etc.
E-fraud: these are financial fraud committed through
the use of bank information technology facilities.
False
Documentation: Documentation is said to be false if it contains alteration in
any material part.
Fraud: This
is a legal term for a purposeful deception that results in financial loss to
another.
Fraudster:
these are persons who professionalized in defiantly people of their earned
income and legal acquired properties.
Forgery:
This is falsification of document or instrument purport to be real when it is
not.
Prevention:
This refers to measures taken to avoid occurrence e.g something.
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