DETECTION AND CONTROL OF FINANCIAL FRAUDS IN NIGERIA BANKING SYSTEM; PROBLEMS AND SOLUTION (A CASE STUDY OF U.B.A)

 

ABSTRACT

 

Fraud can be seen as irregularities involving the use of criminal deception to obtain unjust or illegal advantages. Fraud could be from the employees, management or from the customers. The primary responsibilities for the prevention and detection of fraud rest with management which may be partly discharged by the institution of an adequate system of internal control.

The research work strives to investigate the causes of fraud, inefficiency in the operations of Nigerian banks and lack of adequate control measures by the said financial institutions.

The data for this study came from primary and secondary sources. The primary data includes a draft of questionnaires distributed to various management levels of U.B.A Plc Enugu, direct interview and a visit to the organization. They secondary data includes textbooks, journals, magazines, newspaper and previous related project materials including seminar papers etc.

The data collected were tested and analyzed using the statistical tool of chi-square and sample percentages method to provide objectives analysis of the research work. Hypothesis were also formulated and tested.

The findings of the research work is that financial frauds ion Nigerian banks  is as a result of weakness in the internal control system, dishonesty, and sharp practices by some banks staff. Other findings also include lack of close watch on dormant accounts and defalcation etc.

The researcher recommends that management control systems should be sufficiently flexible to allow personal initiative and individual responsibility adhere to strictly to enhance delivery of assigned duties, secondly there is need for effective and frequent audit assignment in the banks to further help checkmate the incidence of frauds in banks.

CHAPTER ONE

1.0   INTRODUCTION                                                      1

• Background of the Study                                         1
• Statement of the Problem                                 4
• Objective of the Study                                         5
• Research Hypothesis 5
• Research Questions 5
• Significance of the Study 5
• Scope of the Study                                 6
• Limitation of the Study
• Definition of Terms 6

CHAPTER TWO

2.0   REVIEW OF RELATED LITERATURE                    2

• Who are the Bank Fraudsters         13
• Fraud and Fraudulent Practice in Banking Services 16
• The Legal Framework         20
• What is Fraud                 25
• Causes of Fraud in U.B.A Bank 29
• The Effects of Fraud in U.B.A. Bank                         31

 

CHAPTER THREE

3.0   RESEARCH DESIGN AND METHODOLOGY           3

• Area of Study
• Population of the Study         33
• Sampling Method
• Research Instrumentation
• Validity and Reliability of Research Instrument 33
• Sources of Data 22
• Analytical Techniques 22

 

 

CHAPTER FOUR

4.0   PRESENTATION AND ANALYSIS OF DATA           4

• Presentation and Analysis
• Test of Hypothesis

 

CHAPTER FIVE

5.0   SUMMARY OF FINDINGS, CONCLUSION

AND RECOMMENDATIONS                                    5

• Findings
• Conclusion                                                 80
• Recommendations                                         84

 

Bibliography

Appendix

 

 

 

 

 

 

 

CHAPTER ONE

 

INTRODUCTION

1.1   BACKGROUND TO THE STUDY

There has been no single accepted definition of term “fraud”. Fraud in whatever form is limitless on classification. This is why courts and writers on fraud shirk or try to escape away from giving a decisive definition. Notwithstanding, the varied meanings attached to the concept of financial fraud, the author addressed the subject with the following working definitions.

Oxford and Chamber dictionaries define fraud as a criminal deception, act of deceptive trick, cheating swindling person or thing that deceives.

Longman dictionary define fraud as “an act of deceitful behaviour for the purposes of gain which may be punishable by law.

In the mind of civil court of justice, fraud may be said to cover “all acts, omissions and concealments which involve a branch of legal or equitable duty trust or confidence justly reposed and injurious to another or by which an undue influence or available is taken off.

Fagbenmi B. (2008) define banking fraud to mean an act or cause of deception deliberately practiced to gain unlawful or unfair advantages such deception directed to the detriments of another. The goes further to define fraud to mean depriving a person dishonestly or some thing which is his or of something to which he or would or might but for perpetration of the fraud be entailed.

Having closely studies these approaches to definition to fraud especially from the banking perspective. One may correctly see bank financial fraud as a deliberate act by an individual or group within or without the Nigeria banking system to cheat, swindle, deceives or manipulate in other to disposes the banks depositors/shareholders of their funds.

Therefore fraud and forgone in banking transactions can be perpetrated through falsification of entire in accounts of customers with a view to take advantages of the excess proceed.

Despite several definitions of frauds, the author believes that the ones so far given are rater appropriate, advantages and inspiring for the purpose in which the research work intends to achieve. This is because, they contain the basic elements of fraud which include that:

1. There must be decent or deception directed to the detriment of another or entirety.
2. A false representation has been made knowingly or without belief in its truth or recklessly, carelessly, whether it true or false.
3. To obtain damages for deceits, it must be proved that the defendant intended that the plaintiff should act on it and suffered damages in consequences.

The position of banking system in our economy cannot be over emphasized. They act as the ‘conduct pipe’ through which all the financial transactions pass. However, fraud has proved a serious bottleneck to the proper functioning of the roles of the banking system to the Nigeria economy. People are beginning to get worries and sooner than later may loose confidence in our banking sector due to mainly the very increasing incidence of fraud in our today’s banks. Banks as the store house of the public funds and properties should be on trust not fraud.

 

1.2   STATEMENT OF PROBLEM

The frequent cases of financial fraud in many financial institutions in our country is now taken as the utmost concern to financial experts and micro encomiasts. This has also initiated that task of seeking solutions to eliminate its occurrences. To some banking experts, the issue of fraud is an internal vice in the Nigeria banking system. They argue on this because a good number of fraud occur among our banks without the knowledge of outsiders even where the public is aware it doe’s not effect the rate at which customers withdraw or deposit money.

These experts are inclined to believe this because the nation is under-banked, the populace are at no option but to use the available banks like especially the foremost and well established banks like UBA plc even if there are glaring inefficiencies in the operations incompetence and laziness among most banks staff give birth to fraud.

Fraud has paralyzed the roof, the foundation and creditability of our banking system. Just pick up any national daily or from police record and you will be alarmed at the extent and magnitude of bank fraud in Nigeria banking system. Many banks have gone on distressed. Therefore the researcher is aiming at finding out if there is any significant effect or solution to financial fraud in the Nigerian banking system which has to offer to these deficiencies aforementioned with special reference with UBA plc station road, Enugu.

In summary, the major problems of this study are as follows:

1. The incessant/consistent case of financial fraud
2. Weakness this has attributed to banking industry prior to the introduction of effective control of financial fraud.

 

 

 

 

1.3    OBJECTIVES OF THE STUDY

This research work is general set towards ascertaining the effects finical fraud have had on Nigeria banking system or banking industry since its inception in the Nigeria. Furthermore the study is;

1. To determine if any lost of bills the banking have in relationship with the financial fraud in banking and to what extend.
2. To examine the facts contained in the detection and control financial fraud issued.
3. To research into the reason why people involve in financial fraud.
4. To diagnose the banking procedures with a view to fishing out loopholes and suggesting way of plugging them.
5. To examine the various management and government controlling devices geared towards alimentation or checking financial fraud in our banking system.
6. To recommend solutions that may help in checking financial fraud in our banking system.
7. To identify the problem banks face as a result of the introduction of financial fraud.

 

1.4   RESEARCH HYPOTHESIS

To fulfill the above outlined purpose, the research declares the following propositions.

Ho₁:  Most financial frauds have not succeeded because of the complexity of banking activities

H₁:   Most financial frauds have succeeded because of the complexity of banking activities.

Ho₂:  Auditing and investigations are not indispensable weapons in the efficient management of the banking industry

H₂:   Auditing and investigations and indispensable weapon in the efficient management of the banking system.

Ho₃:  Commercial banks do not place any value on the auditors reports.

H₃:   Commercial banks place adequate value on auditors reports.

 

1.5   RESEARCH QUESTIONS

Owing to the need for a compressive study of this topic, the researcher demands it necessary and reasonable to postulated the following research questions. This research has no doubt that the awareness to these questions will help him to draw conclusions and recommendations are necessary.

The following questions are the research questions;

1. What is the commonest causes of financial fraud, can this be checked and controlled.
2. Has the financial fraud in the banking industry helped to impede problems towards banks failure (distressed)
3. What measure do the bank adopt to check financial fraud.
4. To what extend can the customers wait before being attended and assume they are being attended promptly, do they have adequate banking services available to them.

 

 

 

1.6   SIGNIFICANCE OF THE STUDY

This study is intended to highlight the indispensable position of an auditor and those concern to work in an enviable financial houses like banks.

This project will equally to be of immense help to other establishments and organization both in public and private sector. The dive need to establish a visible internal audit unit as a means of internal control should not be over-emphasized.

It is helped that the management of UBA of Nigeria plc station road, Enugu in particular should use the findings of this research to equip the audit the audit department (i.e audit department and inspection). This department being the watch – dog of bank should be given more teeth to bile than more banking prospective investors, promoters, shareholders would find this study very – useful. This will serve as an eye opener to them on what it takes to invest in banks.

This will also help readers and those who may wish to make reference on the topic of study may be while undertaking similar research work.

Government agencies can install adequate internal control measures to avert the incessant frauds and embezzlement rampant in financial houses, ministries and parastatals today.

For prospective auditors and accountants, it is a material of reading. They should be able to understand what is fraud and where to audit, how and why auditing and internal control system is an invertible ambient of the business system.

 

1.7   SCOPE OF THE STUDY

This research work on detection and control of financial fraud is with a particular reference to UBA plc station Road (Okpara Avenue) Enugu and its cover facts on the issue. This research work has a lot of difficulties.

Firstly, top officials of bank were reluctant to give away relevant statistical data on financial frauds that occurred in the organization.

 

 

 

1.8   LIMITATION OF THE STUDY

Sequel to time factor and financial constraints, the researcher restrict the study to Zenith bank Plc, within Enugu metropolis, the researcher limited only to the operational services of the bank because of the above reasons.

 

1.9   DEFINITION OF TERMS

Detection: Is the revelation or discovery of that which is hidden or obscure.

Control: The ability to direct the financial and operating policies of another undertaking with a view of gaining economic benefits from its activities.

Fraud: A false representation by means of statement or conduct in order to gain a material advantage.

System: An assembly of components or elements connected together in an organized way to produce outputs, the components of the assembly are affected by being in the system and the behaviour of the system is charged if any component leaves it.

Banking: As the business of receiving from the public on current account money which is to be repayable on demand by cheque is to be repayable on demand by cheque and of making advances to customers. It is the activities undertaken by banks.

Financial: Is the monetary resources of a person or institution such as a bank or government. It is the management of money or other assets especially those in the public treasury.

Deliberate: Is to consider issues or mattes carefully and thoroughly sometimes through discussion with others.

Concealments: To hide or keep hidden from sight. That is to hide from discovery or keep secret.

Economist: A person who composes a formal expression of high praise.

Perpetrated: To commit or carry out a crime act of mischief.

Plaintiff: A person or business that files a lawsuit against an opposing party (defendant).

Defendant: One who is accused or sued in a court of law (plaintiff).

Decisive: Is having the power or character to make decisions or end disputes.

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