MANAGEMENT OF FRAUD IN NIGERIA COMMERCIAL BANKS

ABSTRACT This research is on the Management of Fraud in Nigeria Commercial Banks. A case study of selected Commercial Banks in Enugu. 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 chi-square test was used to test the hypotheses. The major findings of the study are:    1.           The causes of frauds in commercial bank include a.   Poor management and poor security arrangement b.   Inadequate staff training. c.   Staff negligence.    2.           The various  types of fraud in commercial banks include a.   Loan fraud 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 great importance and has a lot of benefits which includes giving confidence to the bank customers that their money is safe, encourages or attracting local and foreign investors to invest in the banking sector with the impression that their investment is secure. Also, it exposes fraud victims in commercial banks for punishment and prosecution. On the basis of the above findings it was recommended that a.           Government should establish more anti-fraud and anticorruption agencies to assist in sanitizing the Nigeria banking system. b.           Bank management should employ strategies that will ensure early and prompt detection, prevention and control of fraud in commercial banks.

viii

CHAPTER ONE 1.0              INTRODUCTION 1.1              BACKGROUND OF THE STUDY The term irregularities are used to refer to intentional distortion of financial statements, for whatever purpose and to misappropriations of assets, whether or not accompanied by distortions of financial statements. Fraud is one type of irregularity. In auditing guideline, the word fraud is used to refer to irregularities involving the use of criminal deception to obtain an unjust or illegal advantage. Fraud may entail that proper accounting record have not been maintained, it may also indicate that some internal controls are not effective and that the auditor cannot rely on these internal controls. Existence of Fraud in financial statements could jeopardize the statements from showing true and fair view and complying with the companies and Allied Matter Acts (CAMA) 1990. Therefore, fraud in banks must be looked at generally as “acts that involve the loss of assets by banks through deceitful and dishonest means. The intention of the fraudster is to dishonestly benefit himself to detriment of the bank or bank staff or bank customer or any other member of the public via banking operations. Fraud can be committed by bank customer, bank customer, bank staff and customers or a third party that is non-customers. (Eze, 2004).   1.2   STATEMENT OF THE PROBLEM Fraud in the Nigerian Commercial Banks has remained an unavoidable problem and has also resisted all practicable treatment. The incidence has not only become incessant but also been on the increase in the recent past.  Although, it has assumed global dimension, the rate of growth in Nigeria has been outstanding in sophistication from N1542.91 million in 1996, the amount involved in commercial banks alone rose to N3590.31 million in 1997. Where as the actual/expected loss went from N371.08 million to N224.54 million (NDIC). This has affected the commercial banks profitability in no small measure. The general confidence reposed in the banking institutions has become eroded since the new concepts of distress, bank failures and closures of 1990’s. From available records, out of about 115 financial institutions operating in the country as at 1996, surprisingly 52 were distressed while 6 were acquired. With the frequent of fraud, people are no longer at ease keeping their monies in the commercial banks but prefer to keep them in their houses or concretizes them in wares (an uncivilized practice for underdeveloped economy).  The internal control measures in the commercial banks seem to have faults. Such that, it has aided the perpetration of fraud. As a result, the industry shares 90% of all cases of malpractices, forgeries and frauds. (Wiki pedia 2007).   1.3OBEJECTIVES OF THE STUDY The specific objectives of the study include the following. a.                 To identify the causes of fraud in commercial banks. b.                To identify the types of fraud in commercial banks. c.                 To evaluate the extent of fraud in commercial banks. d.                To evaluate how fraud is detected and controlled in Nigeria commercial banks.   1.4RESEARCH QUESTIONS The study poses the following research questions. i.                   What are the causes of fraud in commercial banks? ii.                 What are the various types of fraud in commercial banks? iii.       What is the extent of fraud in commercial banks? iv.      How is fraud detected and controlled in Nigeria commercial banks.   1.5RESEARCH HYPOTHESES For the purpose of the study the following research hypotheses will be formulated and tested. 1.         Ho: Poor management and poor security arrangement in commercial banks cannot cause fraud.   Hi: Poor management and poor security arrangement in commercial banks can cause fraud. 2.         Ho:          Loan fraud, cheque fraud and money laundering                         fraud do not constitute types of banks fraud.      Hi: Loan fraud, cheque fraud and money laundering fraud constitute types of banks fraud. 3.         Ho:          The extent of fraud in commercial banks is high.       Hi:             The extent of fraud in commercial banks is low. 4.         Ho: Fraud cannot be detected and controlled through the accounting and personnel control.      Hi: Fraud can be detected and controlled through the accounting and personnel control.