ABSTRACT
Financial malpractices in the banking industry simply refer to all forms of ill
practices perpetrated in the banking by the staff or outsiders. Such acts are
fraudulent which erode the capital base of the affected banks and no bank for
now is safe from it only that the magnitude in some cases is minimal
compared to others. Due to diverse effects of these fraudulent acts, various
forms of checks are instituted and penalties noted out to offenders. The
activities of the banks tribunals is a clear instance of such measures.
In getting facts for this study, lots of works done on related topics are studied
and various journals are used that have authoritative information on the subject .
The journals consulted are mostly that of banks, supervisory authorities and in
some cases view if bank staff are sought on issues that need clarification.
Fraudulent practices are perpetrated in all sections of any economy, no
government will be sitting idle watching its economy crumble via fraud.
Measures are put in place to check this act but this could only minimize it if it is
as well implemented.
Government’s contribution in checking the malpractices in banks is in the
provision of laws and institutions with responsibility of monitoring this
financial institution. The banking institution themselves are much in the war
against these malpractices to save the institutions from collapse.
In conclusion, large amounts of money are being lost by the banks through
fraud. It is recommended that though there exist laws and checks against this
malpractices, such laws should be enforced in its strict form and reviewed
regularly to avoid certain loopholes that would be taken advantage of.
CHAPTER ONE
1.0 INTRODUCTION
Banks all over the world have through their unique position in an economy,
contributed immensely to the economic growth and development of a nation.
Therefore any problem that tends to hinder their operation such as ‘fraudulent
practices’ is often viewed with seriousness. For long, Nigeria’s financial system has
suffered from fraudulent practices perpetrated by bank employees, people outside
the banks as well as cooperative bodies. This situation became worrisome between
the periods of 1992 – 1995 with unprecedented upsurge in bank fraud, particularly
with the New Generation Banks (NGBs). These malpractices have led to
unhealthiness and technical insolvency of Banks and total collapse.
Bank frauds all over the world were perpetrated essentially for selfish economic
benefits. Thus, according to Ajamole (1990) in (Emergence of Computerized
Banking) he defined fraud “as an act or course of deception, deliberately practiced to
gain unlawful or unfair advantage to the detriment of another”. Any act of unfair
dealing whether against the bank by its customers or against the bank by its officers
or against the customers by the bank, (including its officers) is regarded as fraud.
Various fraud practices have been reported and most of these cases have been tried
in various courts and bank malpractices tribunal. Since the introduction of the Failed
Bank Tribunals, some measures of sanity now reign in the banks.
Economists, see fraud as leakage in the economic system. Sometimes fund got
through fraudulent practices are not invested into the system, Investors are scared, while funds from fraudulent practices are not put into productive uses. This project
i.e Bank frauds prevention and control is presented in five chapters whereby chapter
one will cover the introduction, aims and objectives, significance of the study,
limitation and hypotheses. Then, chapter two examines the conceptual issues and
literature reviewed. While chapter three attempts to analyze the nature and
dimension of fraud, reported cases of committed fraud and the categories of staff or
customers involved therein. Chapter four examines detection, causes, effects of
fraud and prevention and control. Lastly, chapter five shows the summary,
conclusion and recommendation against fraud practices in Nigeria Banking System.
1.1 SIGNIFICANCE OF THE STUDY
The significance of this study is in the fact that it highlights the immediate and
remote causes of fraud practices, effects, prevention, and control in Nigeria Banking
System with particular reference to Union Bank. Several attempts have been made
by researchers, writers e.t.c. On how to minimize or eradicate it if possible. In
various organizations but such efforts have been focused mainly on manufacturing
and distributive as well as public finance management, while little has been done on
areas of Banking and other services industries. The studies have been geared
towards finding out causes and consequences, prevention and control of frauds in
Nigeria Banking Industry.
Therefore, the suggestions that are advanced in this study would no doubt be useful
not only to the banking industry but to all financial institutions be it public or private
sector of the Nigerian economy. The content of this research and the suggestions to
be proffered will serve as resources for further study in the same or similar areas I Banking and other financial institutions particularly in the area of fraud practices
(internally) prevention and control.
1.2 STATEMENT OF THE PROBLEM
Economic crises which of course include financial frauds one of the fastest growing
industry. In Nigeria frauds are often recorded in almost all branches of all banks
particularly commercial ones. These acts have hindered a lot of business
opportunities. Similarly, in United States of America (USA) in 1984 congregational
‘Report on 75 failed Commercial Banks between 1980 – 1983, 61% involved criminal
misconduct by insiders while 39% by outsiders’. The advent of computer which is
hoped to reduce the level of fraud has not helped matters, since that the computer
operator are known to have infused with fake figures and created fake accounts
which serve as a pipe through which large sums of money are being taken away
(illegally). The magnitude of the above problems, its implication to the banking
industry has enabled the research content to answer the following questions.
i. How does a fraud practice in the bank affect the bank?
ii. What are the impacts of fraudulent acts of bank, over the transaction of
their customers?
iii. What are the existence measures in Banks that can be used to check
such fraudulent acts?
iv. What measures can be used for prevention and control of such fraud
practices in Banks (Commercial Bank)?
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