MANAGEMENT OF FRAUDS IN NIGERIAN COMMERCIAL BANKS: AN INVESTIGATION OF THE ROLE OF CBN

MANAGEMENT OF FRAUDS IN NIGERIAN COMMERCIAL BANKS: AN INVESTIGATION OF THE ROLE OF CBN

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ABSTRACT

The research is on the management of fraud in Nigeria Commercial Banks. The main objective of the study is to identify the causes of fraud in commercial banks. The researcher analyzed the data collected based on the response from the questionnaires distributed

The major findings of the study are:

1.        The causes of frauds in commercial bank includes

a.       Poor management and poor security arrangement

b.        Inadequate staff training

2.        The various types of fraud in commercial banks include:

a.        Loan fraud

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b.        Cheque fraud

c. Advance fee fraud. On the basis of the above findings, the study concludes that management of fraud in commercial banks is of the great importance and has a lot of benefit which includes given confidence to the bank customers that their money is safe, encouraging or attracting local or foreign investors. Based on the finding, it is recommended that:

a.       Government should establish more anti-fraud and anti-corruption agencies to assist in sanitizing the Nigerian banking system.

b.       Bank‟s management should employ strategies that will ensure early and prompt detection, prevention and control of fraud in commercial banks.

CHAPTER ONE

1.0   INTRODUCTION

1.1   BACKGROUND OF THE STUDY

Over the years, irregularities have been the problems of commercial banks. The term irregularities are used to refer to intentional distortion of financial statement and misappropriation of assets for whatever purpose. Fraud is one type of irregularities. Fraud, in auditing guideline, is used to refer to irregularities involving the use of criminal deception to obtain unjust or illegal advantages.

Fraud may entail that proper accounting records have not been properly maintained, it may also point out that some internal control system are not effective and could not form a reliable source of information for an auditor. Existence of fraud in a financial statement endangers it from showing a true and fair view and complying with the provision of the companies and Allied Matter Acts (CAMA) 1990.

Therefore, fraud in banks must be looked at generally as “acts that involves the loss of assets by banks through dishonest and deceitful means. The fraudster intentionally

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but dishonestly benefit himself to the detriment of the bank, the bank staff, bank customers and any other member of the public via banking operations. Fraud can be committed by bank staff, bank customers or a third party that is non-customer (Eze, 2004).

1.2   STATEMENT OF THE PROBEM

Fraud in the Nigerian Commercial banks has been notable and has remained an unavoidable problem and has resisted all practicable treatment. This incidence has not only become an incessant phenomenon but also been on the increase in the recent past.

In recent years, the volume and frequency of fraudulent practices in Nigeria banks have been on the increase. According to the Nigerian Deposit Insurance Corporation (NDIC), the level of reported fraud in Nigeria banks rose from N 804m in 1990 to N3, 199m in 1998. Furthermore, the actual/expected loss to the amount involved in fraud rose from 3 percent in 1990 to 22 percent in 1998. This is evidenced in the report, which is the highest fraud ever reported in any particular year by a Nigerian bank in 1998,

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when united Bank for Africa Plc wrote of N786m on account of fraud.

The growing scope and scale of fraud in the Nigerian banking industry is surprising and the general confidence reposed in the banking institutions has become eroded since the new concept of distress, bank failure and closures in the recent years. From available records, out of about 114 financial institutions operating in the country as at 1996, 52 were distressed while 6 were acquired. With the frequent fraud, people are no longer at ease keeping their monies in the commercial banks but instead prefer to keep them in their houses or prefer to hold them in wares.

The commercial banks shares 90% of all cases of malpractices, forgeries and frauds (Wikipedia 2007).

1.2   OBJECTIVES OF THE STUDY

The main objective of the study includes the following.

(1)        To access the impact of frauds on banking public and on bank performances.

(2)        To identify the causes of bank fraud in Nigeria.

(3)       


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