BANK FRAUD AND MALPRACTICE: SOURCES, FORMS AND CAUSES
1.1 BACKGROUND OF THE STUDY
Banking activities in Nigeria date back to the free wanting
between 1895 when the first bank, the African banking corporation where enacted
In the free-banking
period (1892 – 1952) there were no banking acts neither were there any
ordinances to regulate the establishment and operation of commercial banks in
Nigeria, many bank were registered some of which did not mean business while
others simply collected customers deposits and vanished. This derailed the
economy of valuable funds needed for development and individuals of their herd
earned funds. This also brought about loss of faith and trust in the commercial
banks by Nigerians.
However, even with the
introduction of the first banking ordinance in 1952 and the Central Bank of
Nigeria (CBN) ordinance in 1958 to regulate and control the activities of
commercial and merchant banks in the country, fraud and malpractice have
increased in size and the method used required greater sophistication by the
Fraud in our banks
invoices summary techniques or forms such as: forgeries of bank instruments
like: drafts, cheque, vouchers, letter of authority, falsification of accounts
and records and cash fraud, from past records the assumptions is that dishonest
or misappropriation or rather fraud in which ever form, succeed only with the
aid of bank employees who conceives with disguised customers wearing innocent
faces inefficiency and negligence in terms of leadership or supervisory roles
on the part of the bank officials constitute yet another handicap through which
dishonesty, fraud perse prevail or succeed in our banks. This can manifest as
prescribed by the industry.
Presently, with the
instruction of modern banking proceeding improved communication system,
automotive electric gadgets and computers into banking industry, frauds have
rather gone nuclear dimension inspire of the wonderful nature of the computer
and all the precautionary measure taken by banks to prevent fraud in their
banks. The amount involved in fraud nowadays have increased in geometric
progression Olaleya Amupiten in his written on ‘obstacles to growth of banking
industry” said that “it was discovered during investigation that banks now take
extra precaution before clearing a cheque because of rampant incident of frauds
and forgeries, which a bank loss placed on the average of N1 million per each
working day of the year in Nigeria.
Banking in a bid to
reduce the incessant occurrence of frauds in their banks, now take adequate
precautionary measures before clearing cheque drawn on their customers accounts.
Those adequate precautionary measures gives rise to another problem facing
commercial banks that is the problem of time wastage in the banking halls.
Ashimi Kola in his article also said that customers wait a minimum of about two
hours in the banking halls of Nigerian banks to cash their money. This has been
one of it’s most legitimate criticism of the quality of baking services. The
checking process is long and by the time a cheque is released to the cashier
for payment the customer is frustrated and perhaps had fallen asleep. This
calls for an overall of the checking and control system.
The above gives light
of the general situation of things commercial banks. Fraud is therefore a major
enemy to all concerned with the growth and development of our banks. The
intention of this researcher work is therefore, aimed at the identification of
the causes of fraud.
In our banks, the
effects or consequences of banks fraud in Nigeria economy and also to recommend
more functional measures that will help in the minimization and control of
1.2 STATEMENT OF THE PROBLEM
In recent times, bank
frauds dominate the front pages of our daily newspapers, such striking and
easily recalled to the mind headlines include. “cashier nabbed over N80,000”
“accountant arrested and two escaped”, and three forfeit N3million, “men of
“419” invaded banks”, “large scale fraud in banks”, just to mention but a few.
The industry has
continued to witness increased numbers of frauds and malpractice with varying
degree of sophistication. It was reported by the Nigeria deposit insurance
corporation (NDIC) that “Banking industry has lost but N1billion of to
fraudsters last years, indicating a continuing January and March 1993, out of
record fraud attempts involving N4million.
In 1991 a total of
N360.2million was involved in fraud, with actual loss amounting to 25.2million,
compared with theN788.8million recorded in 1990. Although the actual loss
worsened by 13.8 percent in the 1996.
This shows that while
bank management are busy working out means of checking fraud and malpractice
fraudsters on the other hand in conjunction with some dishonest bank are
designing new methods on how to circumvent these measures. It will then be
pointed out here that the results or implications of these are damaging frauds
and malpractice leads to unnecessary loss of huge amount of money. This loss of
money by the banks cripples banks activities and transaction.
Again, every incidence
of frauds and malpractice reduces public confidence on bank, hence they question
the credibility of the banking industry in protecting their money and meeting
up with daily transactions.
Furthermore, the banks
frauds and malpractice delays or shows down the development of banking habits
in Nigeria people shy away from banks in fear of losing their money in case of
Banks fraud and
malpractice keeps the management of banks alert and cause them to waste
resources and energies on fraud prevention and detection. It is therefore the
adverse position banks fraud and malpractice places on these sector of the
economy that crops up this projects
1.3 OBJECTIVE OF THE STUDY
In view of the
fore-mentioned problems, it becomes
obvious that if
nothing positive is done to check these incidence of frauds and malpractice, it
may led to frequent bank liquidations in the economy. The objectives of this
research work is therefore:
i. to carry out the
survey and investigations on the major types o bank frauds and malpractice in
Nigeria using some selected commercial bank in Enugu zone as a case study;
ii. to determine the
causes and the basic factors encouraging bank fraud and malpractice and examine
the various forms and areas of occurrence;
iii. to look into the
possible effects or consequences of bank frauds and malpractice in the
operation of bank in Nigeria;
iv. to examine the
various management and government devices feared towards eliminating or
controlling financial fraud;
v. Finally, to present
recommendations or solutions that may help in reducing if not eliminated bank
frauds or malpractice.
1.4 SIGNIFICANT OF STUDY
Bank fraud and malpractice
like cancer worm have eaten
deep into the fabric
of the baking industry in view of that, all efforts have been made in the is
research work and all possible avenues exploitered so as to proffer solutions
on reduction or prevention of bank fraud and malpractice.
This research will be
for mutual benefits of banks managements shareholders and mostly to customers
whose deteriorating confidence on the banking industry will once be restored.
This leading to overall security of fraud and assets of the organization for
the achievement of management overall goals.
1.5 DEFINITION OF TERMS
The oxford advance
learners dictionary defines it as “the action or an instance of deceiving
somebody in order to make money or obtain goods illegally.
This is the civil
causes of wrong doings which may constitute criminal offences such as
falsification of accounts, alternation of record or documents, manipulation.
However, the research work will deal mainly with or on fraud as it is most