FRAUD AND FORGERY IN THE NIGERIA BANKING INDUSTRY
1.1 Introduction
1.2 Background of the study
1.3 Statement of problem
1.4 Objective of the study
1.5 Significance
1.6 Definition of terms
2.1 Review of related literature
2.2 Concept of fraud
2.3 Effect of fraud
2.4 Types of fraud
2.5 Classification of the basis of perpetrators
2.6 Causes of fraud
2.7 Institutional causes of fraud
2.8 Measures of controlling fraud in banks
3.1 Summary of findings
3.2 Conclusion
3.3 Recommendation
3.4 Bibliography
INTRODUCTION
BACKGROUND OF THE STUDY
The level of fraud in the present day Nigeria has assumed an epidemic dimension. Frauds in the banks are not new. They are as old as the industry itself. However, like in the greater society, they have become one of the most impracticable problems of modern days banking, while the concern of the banking community is growing by day and management vigilance is growing with the help of computerization among others. It is one record that millions of money are being lost to fraud and forgeries on a daily basis. While some of the fraud and forgeries are the handwork of outsiders, others are perpetrated by the staff and sometimes managements of the banks concerned.
In Nigeria alone a recent presented by an NGO shelter Rights initiatives (SRI) stated that a report by regulatory bodies made public revealed that in the monthly June, and July 2002, 12 banks had already reported fraud cases worth N10.3 billion to the Central bank of Nigeria (CBN) and the National Deposit Insurance Corporation (NDIC).
Many of these staff committing these frauds are young, ambitions and talented while some of them inherently honest if the temptation is present and the need is urgently coupled with the likehood of successful committing the fraud, some will succumb to the temptation.
The major goals of most profit oriented companies like bank is to make profit. Banks will make more money if it eliminates the chances of fraud and forgeries itself in the banking system. In detecting frauds and preventing it, frauds will be minimized in banks, and by so doing, the maximize profit.
One record is that millions of Naira are being lost to fraud and forgeries on a daily basis. As a result of this very serious economic crime, some staff in this industry have either being dismissed or have their appointment terminated or prematurely refined. This means that some experienced hands in the sector are lost due to their involvement in frauds and forgeries. The involvement of some banks executives in a large scale fraud is now a source of serious concern in the industry. the fear is now rife that the increasing of frauds in the financial institutions in recent years if not arrested might posse certain treat to the stability and survival of individual financial institution and the performance of the industry as a whole. For one thing, frauds and capital base as well as loss of confidence in financial institution.
For another, the incidence of frauds and forgeries could in extreme cases head to the assure of some affected institutions as had happened in some pasts of the world. Many of the Distressed banks in Nigeria today, had buttered a great deal from frauds and inside credit abuse. The extent of frauds in banks rather than abate continue to escalate.
From all that has been written above, that as form the background of the study, it is the aim of this study to take a segment of the banking industry, and study the approach of the banks to fraud when detected and the prevention also.
----What they do to minimize and prevent the occurrence of fraud.
----Is there any internal control in the banks?
----Is there any security system pertaining control in the bank industry?
----The internal audit of the bank.
----What do you do when or after fraud has occurred?
What they do to detect fraud.
There has been the report of frauds and forgeries in most banking industry. In the month of June and July as stated earlier in the background of this study, there had been a report of fraud cases worth of N10.3 billion in 12 banks, to the central bank of Nigeria. this means that, if all banks report their fraud cases to the central bank monthly, there would be loss of money worth of N10.3 trillions of Naira monthly. So this research work to carryout a research on the cases of this frauds and forgeries, the effect they have already done and also to find out what the management of banks are doing to eliminate these frauds that has eaten deep into the fibres of the industry in Nigeria. the research will also give recommendations such as what to do to get ride of the concern worm of frauds and measures to take in preventing the occurrence of frauds and also the internal control and the internal check to adopt in the banking system, an individual may commit fraud because his existing financial position is not sufficient to enable him attain a desired status or to maintain his existing status. It should be noted that states sacking and states maintenance are products of social, political, economic, and cultural factors in a given society.
An individual may have the desire to defraud but he may have to discard the desire when there is no avenue for putting it into action. Most organization and banks are exposed to frauds because the knowingly or unknowingly create opportunities for their employers to actualize that fraudulent intention. It’s therefore necessary that attention be paid to it is notorious international phenomenon, as fraudsters become more eplisticated in their approach.
The following in this study should be taken to mean the following
Fraud is an intentional use of deception to obtain an unjust or illegal advantage, it basically biome oil of violation of trust. It is a phenomenon that is growing in methods, magnitude and sophistication. Fraud has also been defined as the intentional misrepresentation of financial information by one or more individuals among management of banks, employees, or third parties.
Banking is defined in the 1969 Act as “the business of receiving monies from outside source and deposits irrespective of the payment of interest, and the granting of money loans and acceptance of credits or the purchase of bills and cheques or the purchase and sales of securities for account of others or the incurring of the obligation to acquire claims in respect of loans prior to their maturity or the assumption of guarantees and other warrantees for others or the effecting of transfers and clearings and such other transactions as the commissioner may, on the recommendation of the central bank order published in the federal gazette designate as banking business.
According to the audit operational standards, Audit is defined as the independent examination or an expression of an opinion on the financial statements of that appointment, and in compliance with any relevant statutory obligation.
Internal control system is concern with the actions taken within an organization in order to regulate and direct its activities and personnel. It is the whole system of controls, financial and otherwise, established by management in order to carry on the business of an enterprise in an orderly and efficient management policies, safeguards the assets and secure as far as possible the completeness and accuracy of the records.
Internal auditing has been defined as an independent appraisal activity within an organization for the review of operations as a service to management. It is a management controls which functions by measuring and evaluating the effectiveness of other controls.
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