FRAUDULENT PRACTICE AND ITS EFFECTS ON THE PERFORMANCE OF NIGERIAN BANKS (A CASE STUDY OF STOCK EXCHANGE ONITSHA)
ABSTRACT
In this study, the research set out to examine the effect of frauds in banks. So staff were issued questionnaire as the study sample for the purpose of this research. The questionnaires were analyzed; the researcher discovered the following facts and findings. The computer has contributed immensely to the development of Nigeria banking industry, some of the recent developments in computer technology that has made possible impact in the banking industry include the following: the automated document processor, magnetic ink character recognition, optical character recognition, automated teller machine and electronic funds transfer. The electronic computers are used by C to detect fraudulent activities, such as teaching, loading foreign exchange fraud, forged bank document and so on. And finally, the computer while doing work on fraud detection in banks also makes the work easier and quicker.
CHAPTER ONE
1.0 INTRODUCTION
Fraud generally refers to an act of course of deception deliberately practiced to gain advantage, such deception is directed at the detriment of another. It suggest unfair dealing which could be perpetrated against the bank by its customers or by third partied or by bank officers or by other interest groups.
Fraud can be described as chricerous premeditated action of a person or group of persons with intention of attending the truth of fact for selfish monetary gain. It involves the use of deceit and trick and sometimes highly intelligent cunning and knows how. The action usually takes the form of forgery, falsification of documents and forgery of signature an outright theft.
Employees and well as clients of firms in all industries engage in fraudulent practices all over the world although the existence of fraud in our banks is not an uncommon or unexpected phenomenon, it is worrying because banking industry, that of fraud is easily the most intractable. The banking industry worries more about fraud because of the rather obvious damaging consequences acts on health and for the existence of the institutions. A fraud in banks nearly always leads to loss of money mockers that ordinarily belong to someone other than the banks.
1.1 BACKGROUND OF THE STUDY
The operation of the banks, according to Nigeria deposit insurance corporation (NDIC) annual report (2002) shows that 707 cases of fraud was reported in commercial banks and the amount involved is N12,919.55 million.
In every bas cases where fraud occur with clipping frequency and in wholesales size the banks may found to closedown as a result when the bank loses money and it is wound up, the customers lose money. This leads to loss of confidence in the banks and reduces patronage in our kind of financial environment where banking habits is being encouraged this could result in a major setbacks for the effort.
Fraudulent practices and its effects of programme in Nigeria banks is therefore of special concern to the monetary control and supervisory authorities who are charged with the safety of individual banks and the soundness of the banking industry.
1.2 STATEMENT OF THE PROBLEM
Banks operate on the pivot of public confidence and trust on the ability to deliver as and when demanded. The Nigeria society’s bedeviled with the desire for get rich quick so as to feel important, as Nigeria believe that wealth is the measure of power and importance. It is in realization of this fact that these “get rich quick” mind set of people direct their attention frauding the banks.
Frequency occurrence of frauds ultimately distract the attention of the management and leads to increased running cost, time and energy that would have been spent improving customers services should be expanded on preventing frauds monies that would have also gone into services improvement activities should be expended in setting fraud control procedure and systems.
Moreover, during the years 2003, total of 23 banks cost N333.3m to theft and fraud according to the Nigeria insurance association (NIA) 2003, annual report.
Another reason why the banking industry like any other worries about fraud is that it varies widely in nature character and methodology.
There are two main sources of fraud in banks. The internal and external sources though distinguishable in theory these sources are very often not separately in practice. That is or says a successful often thanks place and succeeds as a result of the collaboration, international or miniterntional ie due to carelessness or error of judgment of an insider bank employee believed that most fraud in bank are with the active convenience of bank staff otherwise how does anyone explain for example, how a cheque drawn in favour of Nigeria is paid some private account and funds withdrawn? Or how does one explain a draft prepared in the name of an institution or a completely different institution of individual collects individual?
Fraud has caused the loss of whopping amount of money contribute to the liquidation of several banks and consequently unemployment and similar problems. This study is therefore be set by the acute problem of discovering the fraudulent practices in the Nigeria banks.
1.3 OBJECTIVES OF THE STUDY
To find out how bank staff can help in preventing fraud
To discover ways of checking bank fraud
To find out why people commit bank fraud
To find out whether bank fraud can be reduced.
1.4 RESEARCH QUESTION
How can bank staff help in preventing fraud?
What are the ways of checking bank fraud?
Why do people commit bank fraud?
Can bank fraud be reduced?
1.5 STATEMENT OF HYPOTHESIS
Ho: Nigeria bank are not fraudulent owing to economic situation
Hi: Nigerians are fraudulent owing to economic situation.
Ho: Most fraud is not caused by poor recruitment policy
Hi: Most bank fraud is caused by poor recruitment policy.
Ho: Most bank fraud is not caused by management lapses.
Hi: Most bank fraud is caused by management lapses.
1.6 SIGNIFICANCE OF THE STUDY
The importance of this study cannot be over emphasized, it will be relevant to the management of the banking industry, as finding from it will help the banks on how to adopt some control measures to check the high incidences of fraud facing them in their operation. Secondly it will be of immense importance to the researcher to update the work in terms of current changes in the banking industry. This research work will also be of a great help to shareholders, investors, depositors, customers and the government at large. Lastly, it will be of special concern to the monetary regulatory and supervisory authority who are charged with the safety of individual banks and the soundness of the banking system.
1.7 SCOPE OF THE STUDY
In this case, the study focus on fraudulent practices and its effects on the performance of Nigerian banks. The incidence of fraud and forgeries could lead to the closure of some affected banks as had happened in some parts of the world including Nigeria. If not arrested might pose certain threats to the stability and survival of individual banks and the performance of the industry as a whole, it will also cover fraudulent practices in international bank and the amount involved in fraud annually.
1.8 LIMITATION OF THE STUDY
This study is face with difficulties which this research work is confronted. Firstly, most bank officers approached were reluctant to give out relevant helpful statistical data on financial frauds occurring in their organization, none of them have accepted ever being refused to let out such vital information so that their competitors will not use it as parameters to determine or measure their internal control efficiency.
Secondly, time, because of the academic work load there is no time to consult texts books, make research in the library and internet in the course of this write up. Lastly financial constraints.
1.9 DEFINITION OF TERMS
FRAUD: This is an act of or course of deception directed as the detriment of another in legal terms, fraud is the act of depriving a person dishonestly of something which is or might be entitle to but for the perpetration of fraud.
PRACTICE: It is something done often. It is something that people do often in a particular way.
FRAUDULENT PRACTICES: Can be said to be the methods by which people engage in an act of deception directed at the detriment of another.
FALSE DOCUMENT: A document that contains fictious information but made to look real to deceive people.
FRAUD MEN: It refers to those who are professionally habited to defrauding people of their legally acquired property or money.
PERPETRATORS: It means a person who commits a crime or does something that is wrong or evil.
DELIBERATE: Something done on purpose rather by an accident.
DECEPTION: The act of deliberately making somebody believes something that is not true.
POPULATION: Is the total number of people living in a geographical place or areas.
BANK: Is an organization that provides various financial services for the safe keeping of money and other valuable items.
FRAUDULENT PRACTICE AND ITS EFFECTS ON THE PERFORMANCE OF NIGERIAN BANKS (A CASE STUDY OF STOCK EXCHANGE ONITSHA)