CHAPTER ONE

INTRODUCTION

1.1    BACKGROUND OF THE STUDY

Fraud is a phenomenon, which is
complex in nature. Given the current travails of the banking sub sector, the
need to block all leakages leading to the loss of fund, more than ever before
becomes compelling. The fraud which has over the years constituted substantial
drain on the vaults of banks and other financial institutions, need not only to
be detected on time but must be prevented and controlled.

One of the best ways of carrying out
this, is to detect and control the dangers posed by fraud on the economy and
the banking industry in particular.

The various interest groups comprising
the shareholders, creditors, depositors, government and the public are not only
interested in the financial statement of a bank, but very much interested in
how the management has managed the fund entrusted to their care.  

One of such internal control measures is
the inspectorate division of any bank. This is purely a management technique
which operates by appraising all activities of the organisation with a view to assisting
management in attain the desire goals and objectives both efficiently and
effectively.

It is on record that the Nigerian Banking
industry has spent thousands of naira in terms of their deposits, yet it is
rather disheartening that all their efforts are being thwarted by sophisticated
fraud attempts.

It is worthy to note that in the bank
efforts in addressing this knotty issue of fraud millions of naira are being
lost to fraud syndicates that have developed efficient and sophisticated. With
the bankdrop, this research will appraise the internal control systems put in
Afribank Nigeria Plc now
with the twin aim of detecting and controlling incidence of fraud and avoiding
receipt of laundered money.           

1.2    STATEMENT OF THE PROBLEM

This study is to find out the problem encountered
in fraud detecting and prevention in Banking Industry in :

The internal control put in place by
bank management sometimes are not strictly adhered to.

Fraudulent act by bank officials and
customers is another problem facing banks in .
So many banks have gone into liquidation because of the frauds are not
discovered.

1.3    PURPOSE OF THE STUDY

            The
purpose of this research work is to disclose the various ways and methods
through which frauds are perpetrated. This study was therefore carried out for
the following reasons:

i.             
To
identify the various types of fraud perpetrated in the banking industry.

ii.           
To
examine the relationship between fraud rate and total deposit size and the
effect of fraud on the banking industry.

iii.          
To
evaluate the relevance and adequacy of internal control measures in detecting
and controlling fraud.

iv.          
To
provide solutions towards reducing the incidence of bank fraud so as to promote
safe and sound banking practices thereby protecting depositions fraud.

1.4    SIGNIFICANCE OF THE STUDY

            This
project will be found interesting, educative and informative by several
interest groups based on the fact that efforts are based on data collected to
make this research work a laudable one. This study will contribute to knowledge
in that it will fill a gap as per the importance of fraud control measures.
This research is most timely because it will serve as a resource material and knowledge
reservoir for bank management most especially in their recent campaign for the
determination of the sources of customers fund.

            This
research will also help the potential investors to know the type of bank they
are to invest in and also help the depositors in determining the security of
their fund.      

1.5    RESEARCH QUESTIONS

i.             
What
are the causes of fraud in Banking industry?

ii.           
How
can internal control measures be effective in detecting incidence of fraud?

iii.          
What
are the control measures put in place to detect fraud in the bank?

iv.          
What
are the relationship between professionalism and incidence of fraud?

v.           
To
what  extent has the various internal
control measure prevent incidence of fraud?

1.6    DELIMITATION
OF THE STUDY

            The
research work will be concerned with the fraud detection and prevention in
Banking industry in Nigeria
in Afribank Pcl now .

1.7    LIMITATION OF THE STUDY

            This
study is limited by lack of funds available to support the research work
shortage of time available for the study and in adequate materials.

1.8    DEFINITION OF TERMS

FRAUD:
It can be defined as
conscious premeditated action of a person or group of person with intention of
altering the truth and or fact for selfish personal monetary gains.

 INTERBAL
CONTROL SYSTEM: Is the examination and evaluation of the adequate and
effectiveness of the management control systems provided of the management
control systems provided by the enterprise to direct its activities in
accordance with the organisation policies and plans.  

FORGERY: Doing a thing fraudulently or with
intent to deceive and by means of such decent to obtain some advantage for
himself of another or to cause loss to any other person.

SHAREHOLDER: Someone who has contributed some
amount to a business ventures inform of equity which qualify him to be the
owner of the company.

REMUNERATION: Reward, pay for services rendered.

CHEQUE: Written order to a bank, to pay the
stated sum from drawer’s account to a bearer or order of named person.

FORGED
CHEQUE: A written
instrument issued with an international act to defraud the bank.

DORMANT
ACCOUNT: An account
where dormant customers balance are kept.

CALL-ORDER:
daily checking of
day’s work