CHAPTER ONE

1.0     INTRODUCTION

1.1     BACKGROUND OF THE STUDY

            The level of fraud in the day Nigeria has assumed an epidemic dimension. It has eaten deep in to very aspect of a having to the extent that a three-year-odd-child talks about 419.

            Fraud id defined as a deliberate act of deceiving somebody in all illegal way in order to make to obtain goods belonging to another party. For an action to constitute Fraud there must be a dishonest intention and the action, must be intended to benefit the preparation to the determine of another person.

            Going by this definition fraud in Nigeria economy cannot be restricted to the bank alone. Fraud in the Banks is not know, they are as old as the Industry itself. However, like in the greater society they have become one of the most intractable problems of modem day banking.

            Other sharp practices that is being perpetrated in the banking industry includes, embezzlement and theft, miss use or harm the asset of the bank, manipulation of figures, forgeries but all  these can be compassed into Fraud that is the word “Fraud” can capsulate all these acts.

            Fraud can be committed by the employers, customer and management of the bank concerned or others operating independently or in conspiracy with others inside or outside the financial institution.

            The historical trends and analysis of the banking industry in Nigeria is discussed to assist in the understanding of the philosophies that will guide prospective reader in the extent to the bank Frauds had been in place.

            Modern banking in Nigeria dates back to the early colonial period. This is as the period when the activities of transaction of the colonial government the deadline of the bater system of frauds and the increasing acceptance of British silver coins, all desired for constitutions in the form of commercial banks for safety and transmission of frauds, the importations and distribution British coin, and provision of credit facilities to the government an the trading companies (usage 1981).

            It was for this purpose in 1872 that the Africa Banking Corporation of England was invited to open a branch office based in Liverpool and West African ports.

            But due to some difficulties, the bank was taken over in 1894 by Elder Depicter and Company with a name as Bank of British  West African (now First Bank of Nigeria Plc ) Registered in London, the bank started with a authorized capital of $100,000. Due to the success of the bank of British West Africa other organizations soon began to show interest in banking opportunities in the Country. This led to the establishment of the Anglo-African Bank, later known as banks of Nigeria, but which became liquidated other were the colonial bank which changed its name of Barcley bank and company (now the Union Bank of Nigeria Plc 1919) also British and French bank 1948 (now the United bank for Africa Plc) and such other foreign owned banks.

            However, these banks do not serve any useful purpose for Nigeria rather they serve as a dear channel for the economies of their promoters who are most importers and whose activities were based on the decision taken at their overseas head offices.

            In other word the development of conventional banks only served as instruments of explosion and expropriation of resources from the Nigeria economy and as such were inconsistent wish local needs, interest and aspirations to help develop the nation economy.

            These among other factors led to the birth of many locally owned and manage indigenous banks, between 1933 to the period of 1952, as much as twenty-five banks were established by Nigerians. Buts it is very sad that out of these banks only four survived beyond this period, they are National bank of Nigeria established by Nigerians in 1933, Agbonmage bank now Wema Bank Plc established in 1945. The present African Continental Bank Plc established in 1945 and Merchant bank (now default) established in 1952. Thus the period 1892 to 1952 was described as the free banking era.

            The period 1952 to 1991 witnessed series bank regulations measure ranging from the Banking ordinance of 1952. Central bank ordinance of 1958 and its subsequent amendments to the latest Central Bank of Nigeria decree 24 of 1991 and banks other financial decree 25 of 1991. The essence of these legislations was to stream line and regulate the performance of the banking industry.

            Thus from 1976 to 1986, the number of banks increases from twenty-one comprising of fifteen commercial and cooperative banks and six merchant banks to fifty-one banks made up to twenty-nine commercial banks, and twelve merchant banks. These period was characterized with the establishment of new generation of private banks owned by Nigerian and Foreign private investment especially the state owned banks.

            Another period that worth mentioned was the deregulation era between 1986 and 1992 which was witness by rapid increase in the number of banks from forty-one banks in 1986 to one hundred and twenty in 1992 which was made up to sixty-six commercial and banks, fifty-four merchant banks.

            As earlier mentioned in the introducing bank, Fraud had its origin from the day of the banking industry started in the country and in as much as the federal government through central bank attempt to solve this problem among others by promulgating different banking legislation, titles or no success was achieved in this regard.

1.2.1        THE OBJECTIVE OF THE STUDY

(i)                 To find out the causes of fraud in banking industry

(ii)               To identify the impact of fraud in banking industry

(iii)             To make recommendation and suggest solution as well to solve the problem of fraud in Nigeria banking industry.

Also, the objective of united bank for African a case study of the project work are:

(i)                 Prevention of banking failure

(ii)               Protection of the bank system against destructive runs in the events of bank failure.

(iii)             To protect the small savers who are unlikely to have access to sufficient information that would enable them to evaluate the solvency of these banks where they hold their savings.

(iv)             To ensure fair play among the competing banks and thus lead to their innovations and efficiency. The U.B.A was established with the objectives due to the effect of structured adjustment program (SAP) and the current deregulation of banking systems this frauds to encourage some banks to take greater risk with customer deposit and because of the federal government directive, it direct   financial supplier of banks and such other deposit taking institution that are facing problem of solvency.

1.3     PLAN OF THE STUDY

            This study is divided to five chapters, chapter one is on general introduction of the topic, chapter two is frame work o the study and literature review methodology. Where focus on sampling techniques. Chapter three focuses on the research methodology, which deals with sampling techniques, chapter four deals with analysis of data which focuses on the method of collecting test of hypothesis, chapter five is on summary conclusion and policy recommendation.

1.4       SCOPE OF THE STUDY

            The study is intended to give broader view of bank Fraud and other sharp practices like Forgeries, Thefts in banking industry, which is the pilot of Nigeria financial system and the Nigeria economy at large.

            As a result of the inability of the researchers to cover the entire bank in the country. The researcher has reduced the scope o the study to data collected from U.B.A. It will however be supplemented with a review of contribution in the daily newspaper, magazines and various professional journals in respect of the subject provided it is on banking.

1.5     SIGNIFICANCE OF THE STUDY

The study will promise on those bank executives individual and other corporate who perpetrate fraud taking into consideration the impact on the customers shareholders and Nigeria economy at large. It will help the future researcher and the public most especially the bank fraud and know how to get it curved.

            Also, it will put conscious and prudent executives on the alert as to identify and tract of fraud whenever they occurred , these would be made known from the result of this project work.

1.6     LIMITATION OF THE STUDY

These are same limitation, which handicapped the researcher to make adequate and proper research of this study. These limitation are these inability of the researcher to set enough facts, most the workers or the affected staff interview could not guide adequate and reliable fact that are needed for the study.

            Most of ten than not, when the office who could give adequate information are contacted, they always found to be too busy and the title time they could spare to attend to the question of the researcher were not always enough to discuss on some other issues which could have also help the researcher in this study.

1.7     DELIMITATION OF THE STUDY

The word banking industry is too broad for the researcher to know the impact of fraud on it. That is why he deliberately restricts himself on an aspect of it, which is United Bank for Africa Plc in other to have 98% accurate if not 100%.

1.8     FORMULATION OF HYPOTHESIS

This research intended to be carried out by making use of both primary and secondary data. Some of the primary data will be collected through secondary data.

            Also, the researcher is also aiming at collecting data from various journals, newspaper, and magazine and read books for the collection or relevant facts for the study.

1.9     DEFINITION OF TERMS

Fraud is defines as a deliberate act of deceiving somebody in all illegal way in order to make money to obtain goods belonging to another party. For an action to constitute fraud there must be a dishonest intention and the action must be intended to benefit the perpetration to the determinant of another person.

          RELATED TERMS

i.          BANK:- This is define as financial institution where money, securities and other valuables are kept and paid, issued borrowed, lent or exchange.

ii.         DIVIDENDS:- This is the money that is been paid to the shareholders by the company for making use of their funds.

iii.        FRAUD:- Is the use of deception for unlawful gain or unjust merit.

iv.        PROFITABILITY:- Is the yielding of a financial merit or other benefit.

v.         FRAUDSTER:- A person that commit fraud.

vi.        PERPETRATE:- This is to commit a crime or something bad.

vii.       SCRUTINIZE:- This means to examine with care and in detain.