Fraud is an inherent vice. It has been on from time immemorial
even before the invention of money. However, in our yet developing world with
the quest to become rich quick on the increase, fraud is becoming rather rampant.
Banks deal essentially in cash and other financial instruments and
because of that it has been exposed to greater risk of fraud. The attention of
many have been drawn to the banks either directly or indirectly. Most
people/workers look up to the banks to rise up to their problems. With such
motives some workers go to the banks disappointed. Not getting so much as
thought, most of them decide to make away with what they can at the slightest
Nigeria’s depressed economy also comes to mind.
Fraudulent persons often connive with bank officials to dupe the banks. Telex
fraud is also a new dimension.
In writing this project I am very conscious of the much work that
has been done in this very project. I am going into this research bearing the
following objectives in mind, determining actually whether financial fraud
exist in Nigerian banks, verifying the effects of financial fraud in banks,
finding out how computer aid in the commission, detection and prevention of
financial fraud, reviewing the work that has already been done in area of
The project will be based on both primary and secondary data
interview questions were used to ascertain the true instruments of the
analysis. Under secondary data magazines, news papers and published books were
used. Responses to the questionnaires were analyzed in percentages, this will
enable the researcher to assign and give percentage weight to each alternative
in order to make a good comparative analysis and to choose the alternative with
the highest percentage.
Fraud is an
inherent vice. According to advanced English Dictionary; Fraud is something
intended to deceive, deliberate trick, intended to gain an advantage. It has
been on from time immemorial even before the invention of money. However in our
yet developing world with the quest to become rich quick on the increase, fraud
is becoming rampant.
is the attractive but false presentation of financial transactions in the
intention to pocket the victims money Banks, stock market and other financial
markets are rather prone to fraud. According to free Dictionary.com it defines
financial fraud as an attempt to deceive another for financial gain.
is a conscious or deliberate effort aimed at obtaining unlawful financial
advantage at the detriment of another person who is the rightful owner of the
fund. Increasing incident of financial fraud in our bank in recent years if not
arrested might pose certain threats to the stability and survival of individual
banks and the performance of the industry as a whole. For one thing fraud
results to huge financial losses to banks and to their customers, thereby
depleting shareholders funds and banks capital base, as well as loss of confidence
in banks. Also the incidences of fraud could lead to closure of some affected
banks as had happened in some parts of the world including Nigeria.
In this project writing I will focus on the two major causes of financial fraud
such as institutional factors and environmental factors .Based on that the main
objectives of this project research is to ; determine actually whether
financial fraud exists in Nigerians banks, to verify the effect of financial
fraud on the banks and Nigerian economy, to find out how the computer aids the
commission, detection and prevention of financial fraud, to determine the types
and causes of financial fraud , to evaluate management control in the detection
and prevention of financial fraud, to review and make better the work that has
already been done in the area of financial fraud and lay basis for future
research to show how banks through proper detection and control can help check
the activities of 419 group as it concerns the banks, and to recommend ways of
solving the problems of financial fraud and find lasting solution to the after
effect of fraud.
This project will
be based on the use of both primary and secondary data. Interview questions
would be used to ascertain the true instrument s of the analysis. Under
secondary data magazines, newspapers, and published books would be used.
Responses to the questionnaires would be analyzed in percentage weight to each
alternative in order to make a good comparative analysis and in choosing the
alternative with the highest percentage.
TABLE OF CONTENTS
1.1Background of study
1.2Statement of the Problem
1.3Significance of the study
1.4Objectives of the study
1.5Formulation of hypothesis
1.6Scope of the
Review of Related Literature
2.2Definition of fraud
2.3 Fraud and fraudulent
practices and banking services
2.4 Nature and types of frauds
2.5 Causes of Bank Fraud
2.6 Effects of fraud in banks
2.7 Loopholes in the banking
2.8 Who are fraudsters in
2.9 The fate of depositors in
case of bank financial
2.10 Effects of computer on detention and
prevention of financial fraud in Nigeria banks
2.11 Measures for controlling fraud in
Research Design and Methodology
3.3Method of Investigation
3.6Method of data analysis
Data presentation and analysis
The research findings
BACKGROUND OF STUDY
Nigerian banking sector continues to be a vital part of the
economy. Even since the inception of the nation’s first bank in the 19th century, banks have recorded
tremendous growth. In spite of the hardship in the economy, people still rush
to work in banks compared to other sectors with the belief of finding greener
pastures there. With such negative motives as making money fast in minds, some
people go to banks and when they can’t make it so fast, they go on to defraud
Financial fraud occurs where there is money. Banks deal with money
and so still remain the widest area open to fraud. Our daily newspapers are
flooded with news of frauds. The rate at which fraud occurs continually
increases by the year. And new means of perpetrating fraud is devised. In
recent times, with advancement in technology in form of invention of computers,
telex system , etc frauds have taken a new dimension.
In our banks, unscrupulous individuals operate the computer
fraudulently. It is now even possible to transfer huge sums of money through
telex system. The activities of the popular 419 group should be mentioned since
this group deals in exhortation of money from their culprits, they usually
withdraw some huge amount of money as well as deposit the money they
fraudulently collected from their culprits.
Worthy of note is the much work that has been done in an effort to
curb fraud, still fraud has continued and had reached such an alarming state,
that even bank notes, cheques and other financial instruments were now forged
and circulated in the economy. In writing this project, I want to reveal those
areas of fraud yet undiscovered and discover the ways of eliminating fraud.
1.2STATEMENT OF THE PROBLEM
Our banks have in recent times been exposed to greater risk of
fraud. The attention of many have been drawn to the banks either directly or
indirectly. Most workers look up to the banks to rise up to their problem.
People see banks as floating in money and identification with banks as success.
With such motives, some workers go to the banks disappointed. Not getting so
much as they thought most of them decide to make away with what they can at the
slightest opportunity. Since it is said that ”opportunity comes but once”, even
the seemly elite may be or are involved in fraud.
Nigerian’s depressed economy also comes to mind. Times are so hard
that people are trying to make it by all means. Fraudulent persons often
connive with bank officials to dupe the banks. Some are imposters who with the
help of some bank officials claim to be what they are not and have large sums
of money remitted to their accounts. Telex fraud is also a new dimension.
Actually, much work has been done on fraud but the wave and
sophistication of the scourge continues. As we know, fraud can never be
completely eliminated as some people, no matter the high security, will always
beat the system to commit fraud.
1.3SIGNIFICANCE OF THE STUDY
This study from the little we know will be very significant to the
Nigerian economy as a whole. The banking sector will remain an inevitable
aspect of the economy and it would pay for it to be conducted in a very free
and fair manner. The areas of risks of financial fraud when detected will help
eliminate the problem posed to the public. The study will help restore people’s
mind to using the banks as some people are now having the impression that banks
are not actually what they are meant to be.
The study will be indispensable to the banks. Common areas of
risks will be brought to light. Effective ways of eliminating fraud will be
1.4OBJECTIVES OF THE STUDY
There are a number of objectives this study aims at achieving by
embarking on this research:
1.To determine actually whether financial fraud
exists in Nigerian banks
2.To verify the effects of financial fraud on the
banks and Nigerian economy.
3.To find out how the computer aids the
commission, detection and prevention of financial fraud.
4.To determine the types and causes of financial
5.To evaluate management control in the detection
and prevention of fraud.
6.To review and make better, the work that has
already been done in the area of financial fraud and lay basis for future
7.To show that banks through proper detection and
control, can help check the activities of 419 groups as it concerns the banks.
8.To recommend ways of solving the problem of
financial fraud and find lasting solution to the after effect of fraud.
1.5FORMULATION OF HYPOTHESIS
There is no relationship between the “size” of fraud in a bank
branch and the “Size” of the bank branch. The size of fraud is defined in two
ways; the number of fraud cases and the amount involved.
Thus hypothesis 1 is expressed mathematically as follows:
Where: Ho =
H1 = Alternative Hypothesis
Y1 = Number of fraud cases per bank
Y2 = Amount of money involved in fraud per bank
X = Staff strength per bank branch
2. That there is
no relationship between this “size” of fraud in a bank branch and the “age” of
the bank branch.
≠ F (P)
≠ F (P)
Where P = age of a bank branch (number of years since
3. That relatively
inexperienced staff of a bank are more likely to commit fraud.
Ho : R ¹ F (q)
Hi : R = F (q)
Where: R = number of fraud cases per category of staff.
q = number of years of banking experience
4. That more
experienced bankers are more likely to swindle large sums of money. That is,
bankers with five or more years of working experience are more likely to
swindle a total of ten thousand naira (10,000) and above.
Ho: A ¹
¹ F (q)
What A = amount of money involved (N10, 000 and above) in fraud
per bank branch.
1.6SCOPE OF THE STUDY
The study covered the commercial and merchant banks operating in
Nigeria. These banks had a total of 1,485 branches of which, 1,071 were filled
with cases of fraud by the central bank of Nigeria. Out of the 1,071, 12% or 126
bank branches spread nationwide were selected and surveyed.
In order to attain the objectives of this research the scope of
the study was defined to embody all relevant aspects of fraud in banking
operations. Information was obtained on the number of fraud cases perpetrated
in each bank, the different types of fraud; the amount of loss to banks and to
customers; the persons involved in fraud; the period of concealment; the
incidence of collusion; the causes of fraud and the level of effectiveness of
fraud prevention measures.
The study also focused on areas relating to staff strength of
banks, size of deposit, size of loans and advances, means of fraud prevention
TERMS AND CONDITIONS APPLY
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