FRAUD PREVENTION AND CONTROL IN BANKING SYSTEM

CHAPTER ONE

1.0                                                   INTRODUCTION

1.1       BACKGROUND OF THE STUDY

The banking system is a critical sector in our economy, and its importance cannot be overstated. The Nigerian banking system was modeled after the British banking system, and it serves as a financial intermediary for funds flowing between the deficit and surplus sectors of the Nigerian economy.

The Nigeria banking sector consists of the Central Bank of Nigeria (CBN), commercial banks, merchant banks, development banks, and specialized banks. This bank deals with various financial instruments and developments that are transferable and desirable in nature. Regardless, the recent incidents of fraud and forgeries tend to pose a serious bottleneck to the proper functioning of the banking system, thereby increasing the association risk and business system loss report early.

The

According to Oxford dictionaries, fraud is defined as criminal deception. Longman dictionaries define fraud as deceptive tricks, cheating, and swindling, but they prefer to define it as fraud in fact and fraud in equality.

1.2 STATEMENT OF THE PROBLEM

According to Okezie (1999), 9.476 frauds involve the use of deception to obtain unjust or illegal financial advantages. The CBN banking supervision annual report 1998 defined fraud as involving willful misinterpretation, the deliberate concealment of material fact, or the purpose of inducing another person to do something. Poss. J.A (1990) P.99 defined fraud as a legal term for a deliberate deception that causes financial loss to another.

However, an overview of recent events in the law is not helping matters at all. In this part of the world, deception and fraud are common.

People of questionable character are applauded and honored with chieftaincy titles, and instead of fighting the epidemic, more people join in on the act on a daily basis. Frauds are generally motivated by greed. This is true because the increase in the activities of fraudsters is motivated by a desire for wealth and the intent to receive and obtain benefit at the expense of another person.

A recent survey conducted by financial institutions is the main component and plays the main role (Ngwu, 2012). The size of an enterprise usually determines the size of the fraud perpetrated in it; banks have been the most victimized, resulting in many bank failures in Nigeria and around the world.

Based on this context, the

The problem now is determining how to effectively monitor the activities of these fraudsters, who appear to be matching their skill with rapid system development. Fraud has been perceived as inherent in the nature of banking operations; however, it can be avoided or reduced to the bare minimum. However, according to the December 2002 report prepared by the financial institution investigated (that in the fourth and also affect the economic growth in Nigeria) quarter, 36% of the banks that rendered repeated returns experienced one forgery, fraud, or other of the total of 176 cases. The total amount at stake in the case was N 802.07 million.

In light of the foregoing, I intend to employ the chi-square technique and analyze the report of data collected from the three selected banks visited.

1.3          OBJECTIVE OF THE STUDY

Many banks have suffered significant financial losses as a result of numerous financial transactions and unsecure loans. Fraud has become so sophisticated that it can make a forged cheque look good enough for the owner to confirm it was his own signature. Frequent occurrences of fraud ultimately divert management’s attention and lead to increased operating costs. However, the major issue in this study is that

Unwanted consequences result from fraud.

losses for the bank, as well as the

management in a state of confusion

and has an impact on economic growth

of Nigeria while spending hard earned control.

Any case of bank fraud includes a bit of public truth in a financial institution, as well as the development of banking habits. Moreover,

1.4          RESEARCH QUESTION

Given the significance of this study, it has become necessary for the researcher to pose the following question.

Is it true that fraud is inherently present in banking operations?

II. Is there any impact on the bank as a result of fraud?

III. Why does it take months for a fraud conviction to be issued?

1.5          RESEARCH HYPOTHESIS

The research on fraud prevention and control in the banking system is a fact-finding one, so the research hypothesis did not appear out of nowhere; it was drawn from the nature of the problem at hand for emphasis, and it is described as a tentative statement about the variable listed below. As a result, the hypotheses are as follows:

Ho1: it is difficult to prevent and control financial fraud in the banking system.

Ho2: bank fraud has a negative impact on the banking system’s profitability.

Bank fraud has a significant impact on depositors’ trust in banks.

Ho1:Bank fraud has no discernible impact on depositors’ trust in banks.

1.6          SIGNINFICANCE OF THE STUDY

Although this research work is not exhaustive due to the lack of some important information and limited time, all of this work is related to financial institutions.

Furthermore, this study is prepared for those who may be interested or willing to conduct additional research on fraud with a focus on financial institutions. However, banks will benefit greatly from this research work in terms of preventing and controlling fraud in their institutions, which they can accomplish by adopting and implementing the various methods suggested by this study in management control systems.

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

One of the major constraints that limited the researcher’s intended work was a lack of funds. The fact that I had insufficient fraud at my disposal accounted for my study’s lack of intensive fact finding.

Another factor that limited this research work was time constraints. The purpose of this study is so minor, but the end result is far superior to mediocrity.

Finally, the uncooperative attitude of the selected banks’ staff became a problem, as there was no access to sources for information needed for the study.

1.9 DEFINITION OF TERMS

Control: In this context, control refers to measures taken to reduce occurrences such as fraud.

Document: According to section 5.467 of the Commercial Code, a document includes a register, a piece of paper, or any other material used for writing or printing that is marked with a letter or any letter or any other sign capable of conveying definite meaning to persons conversant with them, but it does not include trademarks on goods. A document includes not only writing papers and vouchers, but also writing on stone or metal, among other things.

E-fraud refers to financial fraud committed using bank information technology facilities.

False Documentation: Documentation is said to be false if any material part of it has been altered.

Fraud is a legal term.

for a deliberate deception that causes financial loss to another.

Fraudsters are individuals who specialize in defrauding people of their earned income and legally acquired property.

Forgery is the falsification of a document or instrument that purports to be genuine but is not.

Prevention: Measures taken to avoid the occurrence of something, for example.

 

 

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