fact, the main aim of this research work was to carefully examine fraud in the
banking industry using one selected bank from commercial bank. The reason
behind this is that all the banks are similar and any discovery made will be appreciable to all the banks operating in the country.
The research identified and
expose the causes, the various forms of fraud and its tremendous effects on
banks in general. It delved into determining the presence of legal loophole in
the Nigerian legal process which facilitates the perpetration of fraud. It also
identify the means of preventing or reducing incidence of fraud in Nigeria
Apart from this, in carrying out
this research questionnaires were distributed to bank staff. The information
gathered from the respondents were supplemented with oral interviews, personal
observation and a review of some related books journals and newspaper.
The responses of the returned
questionnaire were analyzed under statistical chi – square, statistical
distribution tables of frequencies, percentages, pie chart and bar chart for
the purpose of generalization and influences based on the variable studied.
The result showed that there was
evidence of fraud in the Nigerian banking industry and that its presence has
consequently culminated into general public lack of interest in the banking
Finally, from the foregone analysis,
it is established that fraud reduces our economic development and the solutions
proffered if carefully and fully implemented, it will go a long way to checking
fraud in the banking operations.
TABLE OF CONTENT
OF THE PROBLEM
OF THE STUDY
OF THE STUDY
AND LIMITATIONS OF THE STUDY
OF RELATED LITERATURE
CONCEPT OF FRAUD
The Concept Of Fraud In The
FORMS AND CAUSES OF FRAUD
2.4 Sources of fraud
2.5 Forms of fraud in the Nigerian Banking industry
OF FRAUD IN THE NIGERIA BANKING INDUSTRY
2.7 DETECTION OF FRAUD IN BANKS
2.8 PREVENTION OF FRAUD IN BANKS.
2.9 THE EFFECTS AND DANGERS OF FRAUD:
LAWS RELATING TO FRAUD IN BANKS:
2. 11 LIABILITY FOR PAYMENT AFTER FORGED
2.12 LIABILITY FOR LOSSES OCCASIONED UPON CASHIER
2.13 LIABILITY FOR LOSSES OCCASIONED UPON FALSIFICATION OF ACCOUNTS:
DESIGN AND METHODOLOGY.
SAMPLE SIZE SELECTION
3.5 SOURCES OF DATA;
OF THE SOURCES;
3.7 METHOD OF DATA COLLECTION;
4.0 PRESENTATIONS AND ANALYSIS OF DATA
PRESENTATION OF DATA
SUMMARY OF FINDINGS, CONCLUSIONS AND RECONDITIONS.
word fraud refers to the irregularities involving the use of criminal deception
to obtain an unjust or illegal advantage. It send a wave of doubts, curiosity,
anxiety and concern to people as regards the safety of be it financial or
otherwise. It exists in different sectors of our nations economy, education,
agriculture, mining, production, banking etc.
However, First Bank of Nigeria Plc was
founded in 1894, by a shipping magnate from Liverpool, Sir Alfred Jones, the
Bank commenced as a small operation in the office of Elder Dumpster &
company in Lagos.
The Bank was incorporated as a
limited liability company on March 31, 1894 with Head office in Liverpool. It
started business under the corporate name of the Bank for British West Africa
(BBWA) with a paid – up capital of 12,000pounds sterling, after absorbing its
predecessor, the African Banking Corporation, which was established earlier in
1892. This signaled the pre – eminent position which the Bank was to establish
in the banking industry in West Africa. In the early years of operations, the
Bank recorded an impressive growth and worked closely with the colonial
government in performing the traditional functions of a central bank, such as
issue of specie in the West African sub region
To justify its West Africa
coverage, a branch was opened I Accra, Gold Coast (now Ghana) in 1896 and
another in Freetown, Sierre Leone in 1898. These marked the genesis of the
Bank’s international banking operations. The second branch of the Bank in Nigeria
was in the old Calabar in 1900 and two years later services were extended to
Currently with 339 branches
spread throughout the federation, the Bank maintains the largest branch network
in the industry. The Bank became the first financial institution in Nigeria to
establish a subsidiary bank in the United Kingdom.
Over the years, the Bank has
experienced phenomenal growth. With a share capital of N55.6 million in 1980,
the Bank share capital grew to N1.270 billion as at March 2003. the bank’s
total asset base was N320.58 billion while its deposit base stood at N193.955
billion as at March 2003. Also the Bank’s market capitalization stood at N66.05
billion i.e. N26.00k per share as at 31st March 2003.
To reposition and to take
advantage of opportunities in the changing environment, the Bank embarked on
several restructuring initiatives. In 1957, it changed its name from Bank of
British West Africa to Bank of West Africa in 1969, the Bank was incorporated
locally as the standard Bank of Nigeria Limited in line with the companies
Decree of 1968.
Changes in the name of the Bank
also occurred in 1979 and 1991, to First Bank of Nigeria limited and First Bank
of Nigeria Plc; respectively.
Apart from this, fraud in the
Nigeria Banking Industry is as old as the system itself, a retrospective
analysis disclosed that between 1892 and 1952, a period commonly refer to as
“free banking era” in Nigeria. This happened when there was no form of Banking
Act or Ordinance to regulate the establishment and operations of commercial
banks or a central bank which supervises and control other banks. Within this
period expatriate and indigenous banks were established, all being commercial
Among the banks were:
British Bank of West Africa in 1894. which later become the First Bank of
Nigeria Plc in 1991.
Colonial bank in 1917 (later became Barclays Banks Dominion Colonial and
Overseas and presently the Union Bank of Nigeria Plc.
African continental Bank Plc in 1947
National Bank of Nigeria in 1933
Agbormagbe Bank (now called Wema Bank) in 1945 and
indigenous banks that failed following introduction of banking ordinance of
1952 whose provisions they could not meet.
Some of these banks that were
registered between 1892 and 1952 never opened doors for business even for a day
while some simply collected customer’s deposit and vanished into tin air. It is
a bitter truth that those that failed were for reasons traceable to fraud;
mismanagement and lack of government patronage. The consequence was, it
deprived the individuals, organisations concerned and nation in general, funds
needed for development and increased standard of living. This resulted in a
loss of faith and trust on the banks by Nigerians and thus on impediment for
rapid development of banking operations in the country.
With the banking ordinance of
1952, some element of sanity entered the Nigerian banking industry whish was
noticed in the regulation of the formation, operations and activities of
commercial banks in the country.
From history to the present,
fraud has remained a permanent feature, a regular cankerworm and an infested
blood in the Nigerian banking industry and assuming greater proportion,
different dimensions and sophistication day after day. Subsequent to the first
banking ordinance in 1952 the Central Bank of Nigeria (CBN) Act of 1959 and
other Acts and ordinances with their amendments from time to time which
regulated and controlled the operations of the banking industry in Nigeria, the
occurrence of fraud could not be helped either.
Today, the era of modern banking
operation with improved communication systems, computer technology and
automated electronic gadgets and other precautionary measures by the banks,
fraud has nevertheless been on the increase with its attendant misfortunes on
its victims. Discoveries during investigations shows that banks now take extra
precautions before clearing cheque because of rampant incidents of fraud and
forgery which a bank boss placed on the average of N1 million per working day
of the year in Nigeria. Because of this precautions, customers now waste a lot
of hours in the banks before ever they were paid their cheques; thus a defect
in the quality of banks services. These customers get tired in the midst of the
waiting crowd in the bank hall. Even with the long process of clearing, fraud
could not be terminated as those who perpetrate it are always clever devising
more sophisticated fraud scheme to circumvent the already installed measures.
It is interesting to note that
the Nigerian Banking industry comprises of the Central Bank, Commercial banks,
Merchant banks, Development banks, People’s bank and community banks. The aim
of this research work is to make an empirical examination of fraud in the
industry in general using the First Bank of Nigeria Plc Enugu. It is hoped that whatever happened in this bank as regard
to fraud also applied to the rest of the banks in Nigeria.
1.1 STATEMENT OF THE PROBLEM
increasing wave fraud in the banking industry is quite alarming and sums of
money lost as a result are staggering. Bank fraud has created a lot of distrust
between banks and their customers. The Nigerian Accountant, writing on bank
failure, observed that, “The history frame work of bank failure, will not be
complete without adequate attention paid to the activities of fraudulent
members of the board and staff” This express the havoc fraud is capable of
causing in the banking industry.
methods used in perpetrating fraud are acquiring nuclear sophistication day –
by – day. While the management of banks are busy devising means of checking
fraud, the fraudulent staff are also busy devising new methods of duping the
banks. Fraud leads to an undesired loss of public funds and puts the integrity
of the management of the affected banks in doubts. Every incidence of fraud
chops off some degree of public confidence in the banking industry and slows
down banking habit in Nigeria.
light of this, if nothing positive is done to check these incidence early
enough, fraud could lead to the total crippling of the economy as a whole and
the liquidation of the banking industry in particular. The policy Magazine,
writing on “Building public confidence in banks 2” expresses that banks should
build a reputation which can encourage their customers both existing and
prospective, to transact with enthusiasm instead of reluctance. They should shine to rebuild the
confidence of the public by satisfying its wants both functionally and
This research work is as a result concentrates
purely on the bank industry with a view to providing suitable recommendation
that will help in fraud prevention or minimization.
1.2 PURPOSE OF THE STUDY
purpose of this research work is to carry out an empirical examination of fraud
in the Nigeria banking industry with special reference to First Bank of Nigeria
Plc. The research having identified some of the problems on fraud in the
banking industry like insecurity of customer’s deprivation of funds for
development and upliftment of living
standards, loss of public confidence on banks etc. The main objectives amongst
others for carrying out this research work includes:
determine if fraud exist in the Nigerian banking industry.
determine the causes of fraud in the banks in Nigeria
determine the effects of fraud in the operations of banks in Nigeria.
determine if there are legal loopholes system that aid fraud and
proffer preventive measures and strategies against fraud so as to salvage the
Nigeria banking industry as regards fraud menace.
1.3 SIGNIFICANCE OF THE STUDY
an undebtable fact that fraud can run the confidence people have in the banking
industry. This research work is very relevant in one way or the other to the
Nigerian banking industry in general and particularly to the First Bank of
banks in Nigeria will derive great assistance from this research work in
detecting fraud in their business and subsequently prevent or minimize them.
they can achieve by adopting and implementing the various suggestions and
recommendations made in this study in their control systems.
this study will help readers and those may be interested in carrying out other
study serving as a reference point from time to time.
it cannot be over emphasized the fact that if banks were all reduce the
incidence of fraud in their operations to the lowest level they will be
operating on a more profitable ground. The public confidence on banks will once
more be restored and economic revival achieved.
1.4 STATEMENT OF HYPOTHESIS
carrying out this research work, the following hypothesis were formulated to
enable the research test the validity of the information to be obtained.
Ho: Nigeria banking industry has not experienced many cases of
Hi: Nigeria Banking industry has experienced many cases of
Ho: The rate of fraudulent mal-practices in the Nigeria banking
industry has been minimized.
1.5 SCOPE AND LIMITATIONS OF THE STUDY
research work would have been to investigate fraud in all the commercial banks,
people’s bank, Merchant Banks, Development Banks and Community Banks in the
country for the sake of excellence and achievement of best possible results. As
this would be a large population and likely to pose some problems, the research
work is therefore centered on one bank of interest. The First Bank of Nigeria
Plc. Representing the commercial banks.
researcher encounter the following problems;
constraint: Finance to a large extent determines the success which a venture
can be. For this research work, financial constraint was responsible for the
inability to distribute questionnaires throughout the branches of the bank and
so reliance was made on the information at their main office.
less than fair co-operation on the part of the bank official in supplying the
needed information and data posed its own problem. Most of the bank managers
refused to offer past records on fraud or the amount involved. They bluntly
refused saying they are confidential.
bank will know their weakness
customers both present and the investors would lose confidence on them.
banks would use this fraud element against their operations. In spite of the
assurance of strict confidence of any information or data supplied and that it
would be use purely for academic pursuit, they still refused. This made the
researcher to give up the idea of asking questions which the manager regarded
as sensitive. In addition to this, in framing the questionnaire, the researcher
avoid such direct questions that require exact figures.
question was the not on seat and too busy to attend to you syndromes which the
researcher suffered. The researcher made several visits, and at times, even on
appointment suffered this problem.
and time: The bank’s branches were not near and the academic period was too
short. And period was split between the class work and research work which
compounded the problem. The researcher in the face of these problem was able to
make the work sound and reliable.
1.6 DEFINITION OF TERMS
meanings and interpretations given to most of the term used in this research
work are defined below
: this is the store _house of a nations economy; a place where money and other valuable are
kept for safe custody.
Commercial Bank: There are bank that accept deposits, provides commercial
credits to their customers which involves the creation, distribution and
transfer of deposits.
control system: This is the whole system of control, financial and
other wise, established by the
management in order to carry on the
business of the enterprise in an order and efficient manner, ensure adherence to management policies, safe guard the
completeness and accuracy of the records