Review And Management Of Fraud In Nigeria Banking Industry (A Case Study Of Access Bank Plc And UBA Plc)

Project and Seminar Topics with material for Banking and Finance

Review And Management Of Fraud In Nigeria Banking Industry (A Case Study Of Access Bank Plc And UBA Plc)


This research work was conducted to review and examine management of fraud in Nigerian banking system, identifying the various frauds, causes and ways of controlling the trend using some selected banks with the questionnaire method used to gather facts from the bank staff and customers.

The study revealed that banks deal essentially on cash, financial instruments and other documents which are easily transferable and hence the exposure of banks to both fraud and other frauds. This malpractice is very common in areas involving cash, cheque and other fund transfer operations especially in the height of the recent fund transfer system currently in vogue.

The trend as revealed by the study differs yearly and its range into billions of naira losses to the Nigerian banks as reported in the NDIC annual report. It is important to note that fraud if not given appropriate attention will not only cripple the banking system but will ground the entire economy. The study therefore concluded that financial crimes and other frauds control is a prerequisite for effective banking operation in Nigeria.

Table Of Contents

Preliminary Page(s)

  • Title page
  • Approval page
  • Dedication
  • Acknowledgment
  • Abstract
  • Table of contents

Chapter one

1.0 Introduction

  • 1.1 Background of the study
  • 1.2 Statement of the problem
  • 1.3 Objectives of the study
  • 1.4 Research questions
  • 1.5 Statement of hypothesis
  • 1.6 Significance of the study
  • 1.7 Scope of the study
  • 1.8 Limitation of the study
  • 1.9 Definition of terms

Chapter Two

2.0 Literature review

  • 2.1 Introduction
  • 2.2 Causes of frauds in the Nigerian banking system
  • 2.3 Types of fraud in the Nigeria banking system
  • 2.4 The effects of frauds on the operation of the banking system
  • 2.5 The empirical evidence of frauds in Nigeria banking system
  • 2.6 Measures for controlling fraud by the regulatory authorities
  • 2.7 Practical challenges encountered by CBN on controlling fraud
  • 2.8 Achievements of CBN in the control of fraud in Nigeria

Chapter Three

3.0 Research Methodology

  • 3.1 Introduction
  • 3.2 Research design
  • 3.3 Sources/methods of data collection
  • 3.4 Population and sample size
  • 3.5 Sample technique
  • 3.6 Validity and reliability of measuring instrument
  • 3.7 Method of data analysis

Chapter Four

4.0 Presentation and Analysis of Data

  • 4.1 Introduction
  • 4.2 Presentation of data
  • 4.3 Analysis of data
  • 4.4 Test of hypothesis
  • 4.5 Interpretation of results

Chapter five

5.0 Summary, Conclusion and Recommendations

  • 5.1 Introduction
  • 5.2 Summary of findings
  • 5.3 Conclusion
  • 5.4 Recommendations
  • References
  • Appendix

Chapter One

1.0 Introduction

1.1 Background Of The Study

The Nigeria economy has witnessed a serious jump in the level of frauds 1986 with the liberalization of financial sector that accompanied the implementation of the structural adjustment programme (SAP). Fraud is among the known economic crimes now plaguing the Nigeria financial system.

The extensive liberalization of the economy that has been undertaken since then encourages frauds, and economic problems in general, especially the “white collar” type. Frauds refer to economic crimes through the financial system. However, Economic crimes, according to Kanu (2005), is described as the manifestation of a criminal act done either solely or in an organized manner with or without associates or groups, with an intent to earn wealth through illegal means, carrying out illicit activities which violate the laws of the land and other statutory provisions governing the economic activities of the government and its administration.

These economic crimes are evidently committed mostly through the financial system. Fraud is the use of deception to obtain some financial advantage CBN (2001), while frauds are collectively under economic crimes committed through the financial system.

Therefore, the banking system operations are mostly the conduit pipes through which the funds from economic crimes are transferred or received through various fraudulent and forgery activities which according to CBN (2001) include: Electronic funds deposits through manipulation Fraudulent encashment negotiable instruments, misapplication of lending proceeds and opening of letters of credit without proper documentation.

The effect of economic crimes (financial crimes and fraud) has created senior problems for many financial and non-financial institutions in recent time. According to Udenwa (1998:12), Fraud is a major economic crime which has become one of the most intractable problems of our modern day banking. She also opined that banking fraud and forgeries is international phenomenon, which have become permissive, as fraudsters become more sophisticated and havoc in the approaches.

The nefarious activity of fraud and forgeries has led to serious crises in financial institutions worldwide. Infact, the fear now is that if the increasing wave of frauds and bank frauds are not arrested, it might seriously threaten the survival of many individual banks and the stability of the financial industry as a whole, because the impacts of its operations are largely felt by the entire economy.

Therefore, more time should be spent on board meetings of banks in an attempt to fine solution to the persistent fraudulent practices among management and non-management staff. On the part of the monetary authorities, frauds are special concern because they undermine the safety, soundness and stability of the financial industry and even in some case the entire economy.

To this extent, the researcher intends to investigate into the perpetrators and suggest reasonable steps that could be taken to reduce its effects to the barest minimum.

1.2 Statement Of The Problem

The problems of frauds are presently the most serious problem facing the Nigerian banking system and other financial institutions. It has a negative implication on the operation of banks. Infact, if these problems are not reduced by the regulatory authorities, it might seriously threaten the safety, soundness and stability of the financial systems and even the entire economy. This is because of the inherent problems associated with it which include;

  1. Huge financial losses to banks and their customers
  2. Distress/ closure of the affected banks
  3. Loss confidence in Nigeria banks
  4. Loss of jobs by bank workers
  5. The depletion of share holders funds and capital base.

1.3 Objectives Of The Study

This research work is generally set towards ascertaining the causes of frauds, its affect on banking operations and measures to be taken to reuse its affect in a more specific term the study is aimed at:

  1. Identifying the reason why people involve in frauds
  2. Evaluating the trends and patterns of frauds in Nigerian banking system
  3. Evaluating the implications of bank fraud on the operation of banks and the Nigeria economy.
  4. Identifying factors/ challenges that tend to militate against effective control of financial crimes and frauds.
  5. Evaluating strategies to stem the financial crime by the regulatory authorities.

1.4 Research Questions

The following questions were postulated owing to the objectives of the study and the need for a more comprehensive research work;

  • What are the causes of fraud in the banking industry?
  • Is there effective internal control system in checking fraud?
  • What are those loopholes for fund siphoning in the banking system?
  • What are the trends and patterns of frauds in Nigeria banking system?
  • What are the strategies to stem the financial crimes by the regulatory authorities?

1.5 Statement Of Hypothesis

The following hypothesis has been made for the study:

Hypothesis 1: H1

Frauds will cause huge financial loss to the banks and their customers.

Hypothesis 2: H1

Distress in the banking sector has a positive relationship with frauds.

Hypothesis 3: H1

There is a significance relationship between frauds and negative publicity on the business operation of banks.

1.6 Significance Of The Study

The significance of this research work is as follows:

  1. This study would enable bank executives and indeed the policy makers of the banks and other financial institutions to be more educative on frauds, its trend, patterns and the implication on the operation of banks in Nigeria.
  2. This research work will also provide answer to those challenges encountered by the government for the effective control of the economic crime in Nigeria.
  3. On the side of regulatory authorities, the study will enhance their control strategies by exposing the modus operandi of the fraudsters.
  4. The study would also be an invaluable tool for students, academic body, and institution of higher learners and individuals that wants to know more about fraud and frauds and its trends especially in Nigerian economy.

1.7 Scope Of The Study

Financial crimes and frauds has being a global phenomenon since the existence of banks in Nigeria. However, for the propose of this study, two banks in Owerri are being selected to be representatives of the Nigerian banks in analyzing their state of frauds, upon which findings, conclusions and recommendation will be applicable to the entire banking system.

1.8 Limitations Of The Study

There were some limitations in this research work though it was successful, but there was constrained by some factors on the process if pursuing the study. They are;

  1. Time available for the study was very short, a topic of this nature requires time, considering problems of data collection based on the empirical evidence in this research work.
  2. Non-availability of data, surely a number of data exist for this kind of study, but it require fund to source these information from the internet, and or moving from one bank branch to another.
  3. Inability of some banks officials to disclose facts, which they considered confidential.

1.9 Definition Of Terms

The following terms have been defined to reflect the meaning ascribed to them in the context of this research work.

1. Frauds:

An economic crime committed to an individual or bank officers through the banking system.

2. Fraudsters:

This refers to those who are professionally engaged in defrauding people of their money.

3. forgery:

This is the act of making a copy of something in order to deceive,

4. CBN:

Central bank of Nigeria; which is the regulatory authority in the Nigeria banking industry.

5. Yahoo boys:

This is a popular name for internal fraudsters in Nigeria.

6. Cyber-crime:

These are frauds perpetuated through the internet.

7. Fraud:

This is a legal term for a purposeful deception to obtain some financial advantage which results in a financial loss to another.

8. Counterfeit:

Illegal printing of fake currency notes

9. Defalcation:

This is the removal of cash collected from customer by cashier.

10. God Fatherism:

A political connection in Nigeria.

11. EFCC:

Economic and fraud commission, established for the tracking and eradication of economic crimes in Nigeria.

12. False Document:

A document is said to be false if it contains alterations in any material part either by erasure, alteration or otherwise to the genuine contact

13. Document:

A piece of written, printed or electronic matter providing information or evidence.

14. E-Fraud:

These are fraud committed through criminal use of banks information technology facilitates.

15. Control:

This comprises all means devised in an organization to direct, restrain government and check its various activities for the purpose of meeting organizational objectives.

16. Banks:

A financial institution which accept deposit from the customer and pay in demand.

17. Money Laundering:

This is the processing of concealing the sources or use of illegally obtained money by converting the cash into untraceable transaction in the bank.

18. NDIC:

Nigeria deposit insurance corporation; is a body set up to insure the deposit liabilities of licensed banks and other deposit taking institutions operating in Nigeria.

19. Empirical Evidence:

This is evidence that based on observation or experience rather than theory.

Chapter Five

5.0 Summary, Conclusion And Recommendations

5.1 Summary Of Findings

Bank financial crimes and other frauds have become a worrisome phenomenon in the Nigerian banking sector, increasing by the day at various degree of sophistication. Worst enough is the rate of staff involvement from my findings and this makes it more difficult to detect. Empirical evidence reveals that huge sums of money ranging in billions of naira have been losses to these criminals and fraudsters despite the effort of the regulatory authorities and management of various banking institutions to curb the menace. They have watched helplessly in most cases the havoc being racked by these fraudsters especially bank robbery and money laundering because of the degree of sophisticated method being used.

More so, it was also observed that the present high rate of these economic crimes is the direct cause of our societal influence especially where wealth is glorified irrespective of its source. For these reasons and more, the detection, prevention and control of fraudulent activities should be a collaborative effort of banks, their customer, the public and government including relevant agencies. In line with this and the use of relevant improved technologies and methods, report on fraud and other frauds cases have reduced compared to previous years. This was evidenced in the NDIC annual report, which showed N 938,367,000 for 2006 on fraud while there has been significant recovery by the economic and fraud commission also running into billions of naira as revealed by the chairman Ribadu. However, solutions to effective control of bank fraud and other frauds have been made available in this work including government efforts towards curbing the menace.

From my findings, the effect of bank fraud and other frauds on the operation of Nigerian banking is devastating. Without mincing words, it is clear that these billions of naira being lost in these economic crimes would have helped reduce the poverty level in the country, inflation rate, unemployment rate, level of bank distress in Nigeria etc. but with the recent efforts of banks, government and following the recommendations for control measures contained in this work, the effects of bank and other fraud will be reduced to a desired level if not totally eliminated.

5.2 Conclusion

In conclusion, experience has shown that even in the most regulated home, accident can still occur. Then it is doubtful if the war against fraudsters could be won.

Furthermore, successful control measures built into the baking sector in Nigeria have been defied by these criminals. The psychology and psychological dimension of the fraudsters show that they think round the round in order to device ways of defying the control measures provided by the regulatory authorities and banks. Therefore, the problem of the growing incidence of fraud and other frauds are not that of the lack of management control system but the sophistication of the system. Economic crime control is everyone’s business. It is a battle for all to fight until it is won because the banking system is the hub of every economy and when it sneezes the entire economy catches cold.

5.3 Recommendations

Owing to the fact that bank fraud and other financial crimes exist despite every effort to eliminate it as it has become a worrisome phenomenon both nationally and internationally, the consequence of which has led to global efforts to combat its dangerous effects on the nation’s economics as well a major threat to the survival of banks.

Therefore, there is the need to reduce the undesirable effects on the operation of banks in Nigeria.

In the light of this situation and with the use of the data / information gathered in the course of this research, the following recommendations are prescribed.

  1. Adequate remuneration of bank staff will discourage fraudulent tendencies. A case where the bank is frustrated with the poor remuneration paid to him or her can push the person to fake fresh as a way of making up. Adequate remuneration coupled with way to reduce if not eliminates staff involvement in these economic crimes.
  2. The management of the bank should ensure that when investigating the executive fraudsters, the investigation proper should be carried out by senior investigators or inspectors to avoid undue intimidation and disrespect on the part of the accused which will be the case if a banking officer is sent to go and investigate a general manager.
  3. The government and regulatory authorities like C B N should establish and equip some specialized agencies or institutions for the purpose of implementing the relevant economic crimes laws as this will be very crucial to the effectiveness of the war against bank fraud and other fraud. Some of the specialized agencies include financial intelligence unit (FIUS), economic and frauds commission. These agencies investigate, analyze and pass onto the appropriate authorities’ financial and related information concerning suspected proceeds of crime.
  4. Banks should adhere to the Central bank of Nigeria “know your customer” guideline as this will go a long way in checking some of the fraud committed by outsiders.
  5. Other internal control mechanism includes; adequate staff training is very important as the exposure of bank staff and technique to detect fraud earlier before it is perpetrated.
  6. There is also need for job rotation and segregation of duties. Where a staff is allowed too long on a particular job, the easier it becomes for him to commit fraud and cover it.
  7. Adequate punishment of fraudsters to deter others who have the intention of going into frauds and bank fraud.

Delay and miscarriage of justice has been a single factor that has been encouraging these economic crimes.

Therefore, if the government and the law enforcement agents should give an adequate punishment in form of reasonable years of jail term, it would have reduced the rate of bank fraud and other fraud in Nigeria.

Project Material Download

5,000 5000

The Complete Material Will Be Sent to You in Just 2 Steps

Quick & Simple…

Step One Purchase

Make Payment (Through Transfer) of ₦5,000 to Any of the Account Below

Access Bank PlcAcc No: 0811003731
Samphina Academy
Current Account
Zenith BankAcc No: 1225513212
Samphina Academy
Current Account

Or CLICK HERE To Pay With Debit Card

CLICK HERE To Purchase Material ($15)
Make Payment of 120 GHS to 0553978005 | Douglas Cloud Osabutey | MTN MoMo

Step Two Purchase

Send the Following Details on WhatsApp ( 08143831497) After Payment

  1. Payment Details

  2. TOPIC: Review And Management Of Fraud In Nigeria Banking Industry (A Case Study Of Access Bank Plc And UBA Plc)

The Complete Material Will Be Sent To You On WhatsApp After Receiving Your Details
T & C Apply

  Contact Our Help Desk

Need a Different Topic? Perform a Quick Search

List of Related Works

Click on Any Topic to Preview the Content

Samphina Academy

Samphina Academy is an Online Educational Resource Center that is aimed at providing students with quality information and materials to aid them in succeeding in their academic pursuit.