The focus of this work is to examine the importance of controlling
fraud internally in financial institution through some tactic measures, a case
study of First Bank of Nigeria Plc, Benin. Fraud in financial institutions in
particular and in organizations in general has been a major challenges and
threat to the growth and development of organization/ institutions and the
country in general.
It is an undisputable fact that many financial institutions has
failed in the past and some are staggering today because of their inability to
manage and control fraud internally in their institutions.
Therefore this very work aimed at providing necessary hints for
financial institution on how to carry out effective measures in curbing
internal fraud in order to achieve organizational objectives among other
things. Also, the study provide data (secondary data) for further studies in
the related course of study.
Necessary literatures were deliberately received in which relevant
existing studies were critically examined for appreciations and criticism and
of course the theoretical framework of the subject matter was received, in
which various aspect of curbing fraud internally were extensively and
intensively looked at.
Subsequently the data gathered through the questionnaire
administered were presented, analyzed and duly interpreted.
TABLE OF CONTENTS
1.1Background/History of the Study
1.2Statement of the Problem
1.3Purpose of the
1.4Scope/Delimitation of the Study
1.5Need/Significance of the Study
1.7Definition of Terms
CHAPTER TWO: LITERATURE
REVIEW: THEORETICAL RATIONALE
2.1Types and Causes of Bank Fraud
2.2Internal Control and Types of Control
2.3Internal Control System in Financial Institutions
(First Bank of Nigeria Plc)
2.4Internal Control Measures for Controlling Fraud
in Financial Institutions (First Bank of Nigeria Plc)
2.5Expected Qualities of a Bank for Effective
3.3Population of Study
3.4Sample and Sampling Techniques
3.6Validation of the Instrument
3.7Reliability of the Instrument
3.8Method of Data Collection
3.9Methods of Analysis
Empirical Analysis, Presentation and Analysis of
DISCUSSIONS, CONCLUSION AND RECOMMENDATIONS
5.1Discussion of the
5.4Implications of the Findings
5.5Limitations of the
5.6Recommendations of the Study
5.7Suggestion for further Studies
1.1BACKGROUND/HISTORY OF THE STUDY
Financial institutions are organizations which deals primarily in
money, they constitute the financial framework of an economy, they also help to
pool savings and excess liquidity.
In 1969 the Nigerian Banking Decree specified four types of
financial institutions which carry out banking business, they are the
commercial banks, discount houses, acceptance and finance houses.
The origin of First Bank in Nigeria as commercial bank in 1892 a
company known as Elder Dempster was registered in London and was given the sole
authority to distribute coins in Nigeria later in that same year, the bank had
its headquarters office in South Africa known as Africa Banking Corporation
(ABC). This became the first British bank oversea and indeed in the whole West
Africa, ten (10) months later of it’s operations, the Lagos branch was faced
with both internal and external operations constrains.
In 1894, Elder Dempster and Company bought over the Africa Banking
Corporation to form a new bank in London known as Bank of British West Africa
(B.B.W.A) with authorized share capital £100.00. It opened a branch office in
Lagos, the bank’s name was changed to Bank of West African Limited (BWA) in
In 1966 Bank of West African Limited (BWA) merged with Standard
Bank Limited (SBL) London to form a single bank known as Standard Bank West
Africa Limited (SEWA). In 1969 Standard Bank West Africa Limited was
incorporated with Nigerian Standard Bank Limited, which gave raise to the
present name bank as First Bank of Nigeria Plc in 1979 (Dr. Unugbro 2007, p.
85, Money and Banking).
Prior to 1952, there was no form of Banking Act or Ordinance to
regulate the establishment and operations of commercial banks or a central bank
to supervise the control of banking in Nigeria. During that time many banks was
registered some of which never operated and ever since that period, fraud has
remained a permanent feature in our banking industry.
However, with the introduction of the first Banking Ordinance in
1952 and the Central Bank of Nigeria Act in 1959 and other subsequent Acts and
Ordinances with their amendments over the years used to regulate and control
the activities and operations of financial institutions in the country, fraud
in financial institutions have rather increased in magnitude and the methods
used to perpetrate them acquire greater sophistication day after day.
Anikpitan 2006, a bank of repute maintained;
“that, discoveries during investment show that banks now take
extra precaution for clearing a cheque because of rampant incident of fraud and
Ashimi 1976, maintained;
“that fraud has become sophisticated as to make a forged signature
on a cheque leaf look god enough for the rightful owners to think that it was
Ughamadu .N. on his article on celebrating bank fraud “in that
business times 29 July, 1991 observed that;
The logic for establishing a viable and enabling environment for
any country will be meaningless if it’s banking sector is very porous of fraud”.
Ojo A. T. 2002 emphasized that;
“As an open secret financial institution do not have very large
resources of their own in relation to the total resources at their disposal.
They depend in the remains on other people’s funds which have been entrusted to
them because of the confidence the people have on them as models of
responsibility and safety”.
To establish a sound internal control system various organization
adopt various devices and methods based on their nature of business and the
scope of their operations. Internal control system requires a continuous check
and rechecking of day to day activities of the business in order to ensure the
correctness and fairness of the accounting records, and to detect and expose any
deviation when it has accord.
There is therefore a great need to minimize the defects or
loopholes and make money effective and operational to guard against the
occurrence and re-occurrence of fraud in our financial institutions.
1.2STATEMENT OF THE PROBLEM
In our daily newspapers there are reports of fraud in financial
institutions, for instance the recent frauds that was unveil by the central
bank governor Lamido Sanusi involving some banks chiefs.
Also Business Concord (Jan. 27, 2000) noted with utter dismay that
“Robbers are making nonsense of the various types of security measures in banks
by employing scientific means of gaining access to their strong rooms.
Business Times (23rd Jan.
1990); “the rising incidence of bank fraud has created a lot of distrust
between banks and their customers”, not only that there are increase numbers of
reported cases of fraud but also the sums involved are staggering.
Fraud leads to unwanted loss of public funds and put the
management of the affected bank on its loss. Bank fraud incidence, reduces
public confidence in banking and consequently slows down development of banking
habit in Nigeria.
However, despite the steps and measures taken by banks to prevent
the occurrence of fraud, the situation still remains largely unchanged. It is
therefore necessary to appraise and establish an adequate and effective
internal control system in the financial institution for their orderly and
efficient operations so as to guard against ever-increasing incidence of fraud.
1.3PURPOSE OF THE STUDY
The main purpose of this work is to examine the internal control
system in the operations of First Bank of Nigeria Plc. Also to identify
possible loopholes (if any) in the system, to also ascertain the degree of
compliance of the banks staff with these measure and to offer useful
recommendations based on the findings.
1.4NEED/SIGNIFICANCE OF THE STUDY
Even though this study is not a very comprehensive and exhaustive
one as a result of some limitations are aspects of the work is very relevant in
one way or the other to the Nigeria banking industry as a whole primarily this
study is designed for all those that may be interested in carrying out further
study on internal control system as it is related to fraud prevention in
financial institutions in Nigeria.
Moreover, banks in Nigeria will derive great assistance from this
internal control system and subsequently preventing and minimizing fraud. This
they can achieve by adopting and implementing the various suggestions and
recommendations made in this study in their control system.
1.Does the present internal control system of
financial institution appropriate in present world of technology and
sophistication of the First Bank of Nigeria Plc?
2.How effective is the internal control system in
First Bank of Nigeria Plc?
3.What techniques, if any can internal control
system in banks used to prevent fraud in First Bank of Nigeria Plc?
4.Have your Bank (First Bank) experienced fraud in
the past one, two or three years?
5.Do you think that the introduction of
computerized internal control system in all the branches of First Bank will
eradicate banking malpractices fraud?
6.Does the internal control measures adopted by
First Bank to prevent and control fraud effective in the prevention and detection
7.Does the present control system measures in your
Bank prevents fraud?
8.Are all bank instruments like drafts, cheques
books, certificates of deposit etc under the control of at least two bank
9.Do you think the photograph of every customer
withdrawing up to a certain amount is taken in First Bank of Nigeria Plc?
10.Do you think that fraudulent acts are possible
because of lapses in your internal control system?
11.Do you think the use and adoption of computers
will help in a great way in fighting or preventing the rate of fraud in First
Bank of Nigeria Plc?
1.6DEFINITION OF TERMS
Most words used in this work are technical and may not easily be
understand by all, thus an attempt is here by made to define some these terms.
Control System (ICS): It
is the whole system of control both financial and otherwise established by
management in order to carry on the business of the enterprise in an orderly
and efficient manner.
Limited Company (PLC): They
are public companies registered in the Nigeria Stock Exchange, they opened to
every member of the public and through purchasing of a share one can become a
member/owner of such.
3.Bank: It is an establishment that deals
especially with money; they give out loans, extension of credit, give advices
to customers, etc.
4.Fraud: It’s a criminal act, it’s an act of
deception. It involves tricks cheating, swindling of an individual money or
TERMS AND CONDITIONS APPLY
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