CHAPTER ONE INTRODUCTION 1.1     BACKGROUND OF THE STUDY

There is a genuine fear that the increasing wave of bank fraud is causing a lot Of havoc in our financial systems. This is because the bank fraud has eaten deep into every aspect of the banking system to the extent that many banks have lost the confidence of their customers.

Oxford Advance Learners Dictionary of Current English defines fraud as “Criminal deception”. Fraud is concerned with the activities of those who seek to divert to their pockets the fruits of others handwork. In general, fraud could be said to mean any activity that amounts to unfair dealing. In legal parlance, fraud has been defined as the act of depriving a person dishonestly of something, which is, or of something to which he is, or might be entitled but for the perpetration of fraud. Fraud in banks are not new, they are as old as the industry itself. However, like in the greater societies, it has become one of the most hard to manage problems of modern day banking.

Though a common phenomenon however, of the entire various problem confronting the Nigeria banks today, fraud is the most enterable due to the damaging result of the act in the health and existence of banking especially in an area where banking habit is being encourage. Fraud includes negligence due to improper entry of transactions, inadequate control management, lack of training or orientation, irregular balance of account, and absence of audit exercise. While some of the frauds are the handwork of outsiders, others are perpetrated by the staff and sometimes management of the banks concerned. The most significant percentage of fraud is done by fraudsters in collaboration with bank staff. Bank fraud exists as a result of mode of employment which is principally based on favourism and familiarity and poor security of essential document. It was reported by Nigeria Deposit Insurance Corporations (NDIC) that #7.2b was defrauded of commercial banks. As a result of this, very serious economic crimes, some staff in the industry have either been dismissed, or have their appointment terminated or prematurely retired. This means that some experienced staffs in the sector are lost due to their involvement in fraud. The involvement of some bank executives in large scale fraud is now a source of serious concern in the industry.

In addition to these, the lack of commitment on the part of the staff and the employment policies of some banks tend to make fraud attractive. The high rate of fraud in banks is clearly Unacceptable. Something drastic must be done to urgently stem the tide in view of its image implications for the banking industry and the crises of confidence, which it could cause among bank customers.

1.2     STATEMENT OF THE PROBLEM

Considering the Nigeria experience in recent past, where fraud, corruption failure and distress have become the order of the day, the question that comes to once mind is:

1. Can we leave this crucial sector/industry to the idea and behaviour of the operators?
2. Who are the perpetrators?
3. What are the reasons why such act exists?
4. What can be done to minimize, if not eradicate them?

Fraud result in unwarranted losses for the bank and very importantly, fraud literally clips off a bit of the public’s confidence in the orthodox financial institution that banks are, and delay the full development of banking habits in the citizens and in extreme cases leads to the complete failure of the bank.

1.3     AIM AND OBJECTIVES OF STUDY

The purpose of this research is to critically examine fraud control techniques used in the Nigeria banks.

Specifically, the objectives include:

1. Understand the nature of fraud in Nigeria banks.
2. To identify and look into the causes of fraud in the Nigeria banks.
3. To analyse the extent and effect of fraud in the Nigeria banks and economy in general.
4. To proffer ways of preventing and controlling fraud in the Nigeria banks.

1.4     SCOPE OF STUDY

The study centers on fraud in the Nigeria banks with a keen interest on commercial banks. It recorded cases of fraud in the Nigerian banking industry, what constitute fraud, causes of fraud, most common types of fraud, their effects on the banks, fraud detecting methods and recommendations for controlling and prevention of frauds in the Nigeria banking industry.

1.5     SIGNIFICANCE OF STUDY

This study would be of great use to authorities concern with banking operations, managements, staff customers and prospective investors in the industry. In Nigeria, bank fraud have assumed a frightening scale and sophistication consequent upon the general economic depression of the last decade and the continuing travails of the banking sector in the wake of government frantic policy experimentation. The study will therefore identify the various means (Theft, embezzlement, forgeries etc) employed in defrauding banks. It will also identify the cause of fraud in banks which may be institutional and societal i.e. factors traceable to the internal and external environments of banks respectively.

1.6     RESEARCH METHODOLOGY

In order to achieve the goal and objective of this project, the methodology of this research is summarized under the following heading;

1. Method of data collection

1.6.1     METHOD OF DATA COLLECTION

Various data were needed for the successful completion of this research and several methods were employed to collect relevant data.

1. PRIMARY SOURCE

Interviews were carried out with estate managers of various estates to ascertain the effective of developing a new system.

1. SECONDARY SOURCE:

Consultation of books was carried out and data were collected. This information which was well detailed and comprehensive aided the course of this project.

1.7     DEFINITION OF TERMS

BANK: This is a financial institution legally established, were money and other valuables are kept for security purpose.

Fraud: Fraud which known as swindle is a deliberate misrepresentation which causes another to suffer damage usually monetary losses.

Fraudster(s): A person or group of person who pretends to have qualities, abilities etc that they do not really have in other to deceive other person.

Computer: An electronic device that accepts processes store and output data at high speed according to programmed instruction.