CHAPTER ONE

INTRODUCTION

1.1        Background of The Study

The issue of fraud in company especially the banking industry in Nigeria and indeed, all over the world is receiving more attention now than even before because of it’s effects in eroding customers confidence and partly because of the frequently and the amount involve which have serious impact on the profitability of banks in question indeed, fraud which has been a feature of Nigeria social today is endemic to the business being part of the financial system which is the fulcrum on which any economic fraud”.

          The trend of bank fraud started on a small scale immediately after the Nigeria civil war and has since increased in Geometric progression. This is as a result of the oil boom expansion in the 1970s which led to the massive expansion of economic activities and consequent increase in the number of banks complied with the indigenization policy of the federal government at a time.

          It has to be noted that a fraudulent act without damage or damage without fraudulent act is not actionable. But fraud is actionable if it leads to the expenses of another.

          The state of condition of ours should not be allowed to go on as this may cripple very seriously into the financial system of the country. This is, if not properly addressed, the need to properly check this pervasion therefore geared this research work. Therefore, the work is based on a survival of the company without First Bank of Nigeria Plc Ughelli branch as case study.

         This type of fraud, modes of execution, causes a fraud and recipes are all going to be examined.

1.2        Statement of the Problem

Banks are industries that are mainly dealing with cash and other financial instrument; therefore the degree of the fraud will be much higher than any other industry, this has exposed banks to a persistence target for fraudsters.

           The effect of fraud on the survival in our banks cannot be over emphasized. The effect is so large that huge amount of financial loss of both banks and their customers, the deflation of shareholders fund and bank capital based sources of extreme embezzlement to bank cannot easily be qualified in terms of monetary.

          The time, money energy and other measurable equity use to checkmate the fraudulent attitude would have been explained in improving customer’s services and also the staff of the bank, in fact all the shareholders. Very unfortunately, all these can lead to increases in running cost and major setback for the nation’s effect at promoting bank habit.

          Frankly speaking, it is on read that had led to the closure of banks and financial pains in other part of the world and this may not be possible if the current trend is not checked.

          The rate of occurrence has reached a dangerous height in which all shareholders find way if not eliminating it but minimizing it as a reasonable consideration. This project, by way of contribution is designed to examine the effect of fraud management on a survival of a company with First Bank Plc, Ughelli Branch as a case study.

1.3        Research Question

The work is guided by the following;

1.           How can the problem be controlled in our bank?

2.           What is the magnitude of fraud in the banks?

3.           How effective are fraud control measures in our banks?

4.           Can we ever have sufficient information to predict the occurrence of fraud?

5.           What are the causes of fraud in bank?

6.           What are statutory laws relating to fraud and financial malpractice in bank?

From above questions of the problems of this work there need to provide a workable solution.

1.4        Objectives of the Study

The main objectives of lives research work is to look for practical ways of reducing the incidence of fraud in our companies especially the banking system using first of Nigeria Plc, Ughelli branch as a case study of the immediate objective of the following;

1.           To review the existing literature in respect of frauds in the banking system.

2.           To examine the internal control system with respect to the selected banks in Nigeria, and evaluate the appropriateness and effectiveness of the system as a tool for fraud control.

3.           to ascertain degree of companies of the banks staff with the internal control measures.

4.           To identify possible defects or loopholes (if any) in the system.

5.           To offer useful recommendation based on the finding on how best to curb the incidence of fraud in the banking system.

6.           To examine the relevance and appropriateness in preventing fraud.

7.           To identify the means through which the recommendation can be effectively be implemented.

1.5        Scope of the Study

The topic has been chosen to highlight the effect of fraud management on a survival of the company. However, the study covers banking segment of the banking industry in Nigeria with reference to FIRST BANK (NIG) Plc Ughelli Branch as a case study.

          As at the end of the December, 1998, there were 64 commercial banks in Nigeria with 229 branches nationwide that are insured with the Nigeria deposit insurance cooperation. But because of the negative use of human ingenuity and endowment, most of the banks collapse.

          Indeed, fraud has long been perpetrated in our bank identified and classified as follows;

a.           Theft of cash suppression of lodgement

b.           Opening and operating of fraudulent loans account

c.           Clearing fraud

d.           Falsification of account

e.           Cashiering fraud

f.             Forged cheque with forged signature

g.           Cross firming of cheque and kite flying

Many measures have been introduced especially at the individual bank level to combat this menacing problem with much success. The most threatening aspect; however is that the control of identified types of fraud is destructive indication of the negative use of human ingenuity and endowment.

The need to provide effective solution that is dynamic to the justified way of this work. The type of fraud, method of perpetrating, fraud, cause of bank fraud nature of fraud, magnitude of fraud and recommendation ways of fraud prevention and minimization will be highlighted in this research work.

1.6        Significance of the Study

It is a general consensus that the financial system in any economy is the fulcrum around which the economy resolves without this preview banks strategically occupy on indispensable position in the economy. This is a result of their primary function of servicing as channel or intermediary between the surplus economic unit hence the efficient functioning of the economic.

          In carrying out this study, the researcher intends to highlight the applying and benefit of cost effectively applying appropriate and correct fraud and prevention and detection measure. This will serve as a bench mark particularly to the distressed banks whose unfortunate fraud and other malpractices. Analysis will definitely be of importance to the policy makers in that it will help them in assessing the effectiveness and efficiency of the existing statutory loans and policy and highlight the areas that need further efforts.

          The study also aims at treating how a well designed, carefully installed and a resolutely implemented internal control syste

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