CHAPTER ONE

1.1       INTRODUCTION

The level of fraud in the present day Nigeria has been on the high side. It has eaten into every aspect of our life and economy to the extent that a three years old child talks about Advance Fee Fraud Scheme (419). The economy has faced several challenges today as a result of the billions of naira that have been lost due to the ugly Monster (fraud). The term “fraud” has been defined in different ways by different authors.   

For the purpose of this study, fraud can be viewed from the following scholars and experts. The Oxford Advanced Learner’s Dictionary defined fraud as criminal deception. Fagbemi (1986) defined it as  the act of depriving a person dishonestly of something which is his. In its lexical  meaning, fraud is an act or course of deception deliberately practised to gain unlawful or unfair advantage ; deception directed to the detriment of another. Financial Institution Training Centre (FITC). Helicon (2000) also defines “fraud in  law as an act of deception resulting in injury to another,”. For an action to  constitute  frauds therefore, there must be a dishonest intention and the action must be intended to benefit the perpetrator to the detriment of another person.  

     Going  by  the definition, fraud in the Nigerian   economy  cannot  be   restricted   to       banks alone.  Although, fraud cuts across all sectors of the economy but the size of an enterprises usually determines the volume of fraud perpetrated. The problems such as; inadequate manpower, poor internal control system and internal checks, inadequate incentives and unsuitable legal  framework for dealing with offenders, downturn in economy,   recognition   being   accorded the   wealthy    people   regardless   of   their  source   of  wealth   play  a  major  role  in  the  perpetration   of  frauds.       The  fear  now  is  threat  of

which the devilish and unscrupulous act will pose to the stability and survival of individual banks, financial institution the performance of the industry and economy as whole. Fraud results in huge financial losses to financial institutions and their customers, depletion of shareholder funds and capital base as well as loss of confidence in financial institutions.                    

1.2    STATEMENT OF PROBLEMS

The problems of this research work will revolve around finding out the continuous causes of bank frauds in virtually all banks and other financial institutions and its effect on the economy. In spite of the banking reforms and corporate governance instituted by the Central Bank of Nigeria (CBN), fraud in Nigerian banks has remained an unavoidable problem and has not only become incessant but also has been on the increased in the recent pasts. This hydra headed monster (fraud) has negatively affected the profitability position of Nigerian banks and the general confidence repose in the banking industry has become eroded.

Furthermore, the research is aimed at checking the economy implication of these frauds to our international relationship on global market economy. 

1.3    OBJECTIVE OF THE STUDY

          The general objective of the study is to highlight cause and various forms of bank frauds, its effect and ways of preventing them. The specific objectives which this study is designed to achieve include.

i.             To identify the causes of fraud in banks

ii.           To examine the various types of fraud perpetrated in banking.

iii.          To identify the various ways employed in defrauding banks.

iv.          To recommend measures aimed at preventing, controlling and detecting the incidence of banks fraud.

1.4    RESEARCH QUESTIONS

The following research question guided this study:

1.       In what ways does lack of effective internal control system lead to banking fraud?

2.           In what ways does lack of enough motivation or incentive causes banking fraud?

3.           In what ways do societal values contribute to bank fraud?

4.           In what ways do bank frauds contribute to the dwindling economy fortune of our country?

1.5    RESEARCH HYPOTHESES

          For the purpose of this research work, the following assumptions are made;

Ho:    There is no relationship between effective internal control and bank fraud.

Hi:     There is relationship between effective internal control and bank fraud.

Ho:    There is no relationship between motivation or incentive and bank fraud.

HI: There is relationship between motivation or incentive and bank fraud.

Ho:    Societal values do not of have any effect on bank fraud.

Hi:     societal values do have effect on bank fraud

1.6    SCOPE OF THE RESEARCH

Bank fraud and its effects on our economy, is an extensive topic that may involve commercial banks and community banks. The researcher  would like to touch all aspects of banking activities, but for want of time and financial constraints, this study focuses on the problem the researcher limits his work to frauds in commercial banks especially Union Bank of Nigeria Plc Enugu.

          Most importantly, records publications could be reached easily and frauds traced in the commercial banks than other banks. Though the writer dwelled a little into fraud in merchant banks emphasis is places  more on commercial banks.

1.7    SIGNIFICANCES OF THE STUDY

          The Significance of this study can be seen from the key areas practical and academic.

1.7.1 PRACTICAL SIGNIFICANCE

The study will be significant to, and practically assist in boarding the understanding of the following:

v   The bank officials/management: it will enlighten then on key areas where attention should be concentrated in order to minimize the perpetration of fraud.

v   Bank customers¸ it will expose than to the knowledge of dealing with their bank instruments such as cheques, deposit slips, ATM cards etc in order to reduce the incidence of fraud in the banking industry.

          In addition, this research will aid in enacting laws  that will not only be effective  but also revealing  ways of curtailing the social vice fraud.

1.7.2 ACADEMIC SIGNIFICANCE

From academic stand point, the study will be significant in the following ways.

v    It will serve as a reference material for further studies by other researchers.

v    It will contribute to the enrichment of existing literatures on the effects of bank fraud in nig economic.

v    It will proffer way (of interest to academics) based on empirical evidence on how the cankerworm (fraud) can be minimized in the banking system.

and persons concerned to give out information needed for this study will also pose some problem.

1.4    DEFINITION OF TERMS

          FRAUD:- Frauds are acts of dishonesty deceit falsifications and manipulations perpetrated to gain under monetary and or non-monetary benefits.

INTERNAL CONTROL:- This refers to the whole system of control, financial and otherwise, established by the management in order to carry on the business of the enterprise in an orderly manner, safeguard its asset and secure as far as possible the accuracy and reliability of its records.

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