BANK FRAUD AND MALPRACTICE: SOURCES, FORMS AND CAUSES
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BANK FRAUD AND MALPRACTICE: SOURCES, FORMS AND CAUSES
SOURCES, FORMS, AND CAUSES OF BANK FRAUD AND MALPRACTICE
1. INTRODUCTION
1.1 BACKGROUND TO THE STUDY
Banking activities in Nigeria stretch back to 1895, when the first bank, the African Banking Corporation, was established in Nigeria.
There were no banking acts or ordinances to regulate the establishment and operation of commercial banks in Nigeria during the free-banking period (1892-1952). Many banks were registered,
some of which did not mean business, while others simply collected customer deposits and vanished. This deprived the economy of critical funds required for progress, as well as individuals of herd-earned funds. Nigerians also lost faith and trust in commercial banks as a result of this.
Despite 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 grown in size and sophistication.
Fraud in our banks invoices summary techniques or forms such as: forgeries of bank instruments such as: draughts, cheques, vouchers, letter of authority, falsification of accounts and records, and cash fraud,
from past records the assumptions are that dishonesty or misappropriation or rather fraud in any form succeeds only with the aid of bank employees who conceives with disguised customers wearing innocent faces inefficiency and negligence in terms of leadership or superintendence This can emerge in the manner defined by the industry.
With the introduction of modern banking procedures, improved communication systems, automotive electric gadgets, and computers into the banking industry, frauds have rather taken on a nuclear dimension as a result of the computer’s wonderful nature and all the precautionary measures taken by banks to prevent fraud in their banks.
Nowadays, the quantity of money involved in fraud has increased in a linear fashion. “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,” said Olaleya Amupiten in his written on “obstacles to growth of banking industry.”
Banking institutions, in order to prevent the occurrence of fraud in their institutions, now take necessary precautionary procedures before clearing cheques drawn on their clients’ accounts.
These adequate preventive procedures give rise to another issue confronting commercial banks: time waste in banking rooms.
In his essay, Ashimi Kola also stated that clients must wait at least two hours in Nigerian bank banking rooms to cash their money. This has been one of the most valid criticisms levelled against the quality of baking services.
The checking process is lengthy, and by the time a cheque is released to the cashier for payment, the customer has become agitated and may have slept off. This necessitates a review of the checking and control mechanism.
The preceding sheds information on the overall status of commercial banks. As a result, fraud is a huge opponent to everyone connected with the growth and development of our banks. As a result, the goal of this researcher’s study is to identify the reasons of fraud.
In our banks, the impacts or repercussions of bank fraud in the Nigerian economy, as well as to offer more functional solutions that would aid in the reduction and control of fraud.
1.2 STATEMENT OF THE PROBLEM
Bank fraud has recently dominated the front pages of our newspapers.
Such eye-catching and readily remembered headlines can be found in everyday newspapers. “cashier nabbed over N80,000,” “accountant arrested and two escaped,” and three forfeit N3million, “419 men invaded banks,” and “large scale fraud in banks,” to name a few.
The industry has seen an upsurge in the amount of scams and malpractices of various sophistication. The Nigeria Deposit Insurance Corporation (NDIC) said that “the banking industry has lost only N1 billion to fraudsters in the last years, indicating a continuing January and March 1993, out of record fraud attempts involving n4 million.”
In 1991, a total of N360.2million was involved in fraud, with an actual loss of 25.2million, compared to N788.8million in 1990. Despite the fact that the actual loss increased by 13.8 percent in 1996.
This demonstrates that, while bank management is busy devising strategies to combat fraud and malpractice, fraudsters, in collaboration with some dishonest banks, are devising innovative methods to avoid these efforts.
It will then be highlighted that the outcomes or consequences of these are devastating frauds and malpractice, resulting in wasteful loss of large sums of money. The banks’ losses hamper their operations and transactions.
Again, every instance of fraud and malpractice undermines public trust in banks, and as a result, they question the banking industry’s trustworthiness in preserving their money and meeting everyday transactions.
Furthermore, bank fraud and malpractice slow or halt the growth of banking habits in Nigeria, as people avoid banks for fear of losing their money if fraud occurs.
Bank fraud and malpractice keep bank management on their toes, causing them to waste resources and efforts on fraud prevention and detection. As a result of the negative impact that bank fraud and malpractice have on certain sectors of the economy, this project has arisen.
1.3 GOAL OF STUDY
Given the aforementioned issues, it becomes
It is evident that if nothing is done to reduce the frequency of fraud and malpractice, the economy will face repeated bank liquidations. As a result, the following are the research objectives:
i. conduct a survey and investigation of the principal types of bank frauds and malpractice in Nigeria, utilising a selected commercial bank in the Enugu zone as a case study;
ii. to investigate the causes and basic variables that encourage bank fraud and malpractice, as well as the various forms and locations of occurrence;
iii. investigate the potential implications or consequences of bank fraud and malpractice in Nigerian banking operations;
iv. to investigate the different management and government tools feared for eliminating or regulating financial fraud;
Finally, give proposals or remedies that may aid in minimising, if not eliminating, bank frauds or misconduct.
1.4 THE SIGNIFICANCE OF THE STUDY
Bank fraud and malpractice have eaten the banks like cancer worms.
As a result, all efforts have been made in the aforesaid study work, and all feasible avenues have been explored in order to provide solutions on the reduction or prevention of bank fraud and malpractice.
This research will help both bank management and shareholders, as well as customers whose dwindling trust in the banking industry will be restored. This leads to overall fraud and asset security for the organisation in order to accomplish management’s overall aims.
1.5 DEFINITION OF TERMS
FRAUD:
According to the Oxford Advanced Learners Dictionary, it is “the act or instance of deceiving someone in order to make money or obtain goods illegally.”
MALPRACTICE:
This category includes civil causes of wrongdoing that may result in criminal charges, such as fabrication of accounts, alteration of records or documents, and manipulation. However, the research will focus mostly on or on fraud, as it is most commonly known.
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