ABSTRACT
Fraud is
gradually becoming rampant and a daily occurrence in our banking industry,
while the bank management are busy working out means of detecting, checking
fraud, the fraudsters on the other end are busy designing new method of
circumventing those measures in conjunction with some dishonest bank staff. It
should be pointed out that effect destabilizes banks not only that, hinders
growth of banks and attaining their aims and objectives or goal. Hence we have
good numbers of banks that were distress, acquired by other banks and merged
with other banks in the country in the present 21st century. The menace ranges
from falsification of entries, forgery of signature of account holders,
spurious letter of credit, cash theft by bank cashiers, telex fraud, collusion
in issuance of loans, manipulation of financial data, misrepresentation of
automated teller machine (ATM), to mention but a few. The objectives of
this research work therefore to carry out survey and investigation on the major
causes of fraud and their effect on the Nigeria economy with reference to GTBank
plc, union bank plc, Skye bank plc, keystone bank plc, stanbic IBTC and united
bank for Africa plc (UBA) and others. The project also evaluated various forms
of fraud and malpractice that can be in existence, relating to this project in
examining the problems, the researcher used both primary and secondary data. In
conclusion, the researcher believes that this study has somehow achieved its
predetermined aims and objectives by identifying various ways by which frauds
and malpractice and possible ways of preventing them. Finally, this report is
primary a prelude to the student undertaking similar work in related discipline
as the writer due to the constraints encounter could not go beyond this scope.
This project finally worked out ways of preventing or reducing the above
problems.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
The concept fraud is a term known in
all works and cranny in Nigeria. Fraud has eating deep into the fabrics of
Nigerian society, mostly in this present 21st Century. The only remedy to this
ugly situation will be self-discipline and honesty among bank staff, otherwise this
decadence will persist. What is fraud? Some well-read individual has tried to
bring the subject home in a better language for easy understanding. Okorie
(2000). Defined fraud in his book “Understanding Practical Auditing and
Investigation,” as irregularities involving the use of criminal deception to
obtain unjust or illegal advantage. The word irregularity is used to refer to
intentional distortion of financial statements for whatever purpose and
misappropriation of Assets. Donnel (2001) argued that “fraud in the
contemplation of Civil Court of Justice, may be said to include all act of
omission and concealment, justify reposed and are injurious to another by which
undue or unconscientiously is taken of another”. Microfinance bank
certification programme study manual (2012) define fraud as a deception
deliberately practiced in order to secure unfair or unlawful gain. Adewumi
(2011) described fraud as a “conscious premeditated action of person or group
of person with the intention of selfish or personal monetary gain”. It involves
the use of deceit and trick and sometimes highly intelligent canning, and known
how. The action usually takes the form of foregoing falsification of documents,
outright theft. Fraud in its entering whereby another is sought to be deprived
by illegal or inequitable means what he is entitled to Donnel (2001).
The above definition may not enough to express what fraud is to the
reader, but can at least give a vivid definition of the term because it
contains the fundamental of fraud which includes. 1. There must be deceived
through motive immaterial. 2. There must be damage to the person deceived,
Infact, where there is money, there is bound to be fraud. Harry (2000) opined
that “No one is entirely immune to fraud. It crops up in small and large
amount. It is perpetrated by management both senior and junior employees
whenever fraud is mentioned, one thinks of loss of money in financial
institution like banks and insurance companies. In the 1960s, Banks and
Insurance fraud are not etched. The establishment of banks and more insurance companies’
concomitant at over stretched of staff resources and accordingly, the weakness
in the system the result of these is the speed at which fraud in banking and
insurance companies has risen. Commercial fraud covers multitude of malpractice
including such “with dollar crimes”, as obtaining credit without intending to
pay, obtaining money in mart-order business without supplying the goods,
obtaining money by promising to invest and not doing so, obtain by computer
fraud insiders trading and tax fraud. “A Corporate Crime”. Where business
people commit frauds against other invest or one tax authorities or where
directors commit fraud against companies. Fraudsters involve themselves in
fraudulent activities so as to be reckon with the society as those who have
made it. The loss of funds’ assets through fraud reduces resources available
for use in bank and insurance company operations. Considering the up-short the rate
of frauds, hence the study of the effect control and possible solution to these
special crimes in bank.
1.2 STATEMENT OF THE PROBLEM
Banks has continued to witness increased number of fraud and
malpractice with varying degree of sophistication. It was reported by the
Nigeria Deposit Insurance Corporation (NDIC) that “Banking Industry has lost
billions of naira to fraudulent activities, indicating a continuing increase in
banking fraud” in the present 21st century in Nigeria. This shows that while bank
management are busy working out means of checking fraud and malpractice
fraudsters on the other hand in conjunction with some dishonest bank staffs are
designing new methods on how to circumvent those measures. It will then be
pointed out here that the results or implication of these is damaging. Fraud
and malpractice leads to unnecessary loss of huge amount of money. This loss of
money by the bank cripples banks activities and transactions. Again, every
incidence of fraud reduces public confidence on bank; hence they question the
credibility of the banking industry in protecting their money and meeting up
with daily transactions. Banks fraud and malpractice delay or slow down the
development of banking habits in Nigeria economy. People shy away from banks in
fear of losing their money in case fraud occurs. Banks fraud and malpractice
keeps the management of banks alert and cause them to waste resources and
energies on fraud prevention and detection.
1.3 OBJECTIVES
OF THE STUDY
The main aim of the study is to look out for the effect of
bank fraud on Nigerian Economic Development.
In view of the aforementioned problems it becomes obvious
that if nothing positive is done to check the incidence of fraud, it may lead
to frequent bank liquidations in the Economy.
The main objectives of this research work therefore are as
followed:
1. To carry out the survey and
investigation of the major type of bank fraud and malpractice in Nigerian
Economic development in 21st century using GTbank as a case study.
2. To determine the causes and the basic
factors encouraging bank fraud and malpractice and examine the various forms
and area of occurrence.
3. To look into the possible effects or
consequence of banks frauds and
malpractice in the
operation of banks in Nigerian Economic development
in 21st century.
4. To examine the various management and
government devices geared towards eliminating or controlling financial fraud.
5. To represent recommendations or solution that
many help in reducing it not
eliminated, bank fraud or
malpractice in Nigerian Economic development in 21st century.
1.4 RESEARCH
QUESTIONS
The investigation concerning this study will be based on the
following questions.
1. To what extent does fraud and malpractice affect
banks earning?
2. Does fraud and malpractice lead to loss of funds in
the banking industry?
3. To what extent do dishonesty bank staff, societal value
and inadequate staff,
training contribute to the existence of
fraud or malpractice in the banking
industry.
1.5 RESEARCH
HYPOTHESIS
According to Donnel and Orwell (2001) in a book American
Encyclopedia Hypothesis is defined “as a preposition assured to be true merely
for the purpose of argument or a preposition or theory put forward to account
for an order of a body fact”.
To guide this research work and to accomplish the above
outline objectives the following hypothesis will be subject to testing.
1. H01: Fraud malpractices lead to /do not lead
to unnecessary loss of fraud in the Banking Industry.
2. H02: the occurrence of fraud and malpractice
reduces/ do not reduce public
confidence in banking industry.
3. H03: Dishonest bank staff societal value and
inadequate staff training are/are
not major causes of fraud or
malpractices.
1.6 SCOPE
OF THE STUDY
The main focus of this study is on the
effect of fraud and malpractice on Nigerian banks with reference to some
Nigerian banks. The staff of the banks, which includes top managers, middle
managers, lower managers and other staff in Ota, Ogun State. The study cannot
be said to have covered all aspect of the topic under study and no single text,
articles can pretend to have done so. Since the work is purely for academic
purpose.