DETECTION AND PREVENTION OF FINANCIAL FRAUD IN NIGERIAN BANKS
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DETECTION AND PREVENTION OF FINANCIAL FRAUD IN NIGERIAN BANKS
ABSTRACT
Fraud is a natural vice. It has existed since the dawn of time, even before the advent of money. However, in our still-developing world, where the desire to become rich quickly is on the rise, fraud is becoming very common.
Because banks deal primarily in cash and other financial instruments, they are more vulnerable to deception. Many people’s attention has been drawn to banks, either directly or indirectly.
Most people/workers look to banks to solve their difficulties. With such motivations, some employees are let down by banks. Without giving it any thought, the majority of them opt to flee with whatever they can at the first opportunity.
Nigeria’s weak economy comes to mind as well. Fraudsters frequently work along with bank personnel to defraud the banks. Telex fraud is a new dimension as well.
While writing this project, I am acutely aware of how much work has gone into it. I am approaching this research with the following goals in mind: determining whether financial fraud exists in Nigerian banks,
verifying the effects of financial fraud in banks, determining how computers aid in the commission, detection, and prevention of financial fraud, and reviewing previous work in the area of financial fraud.
Interview questions were used to determine the genuine instruments of the analysis for the project, which will be based on both primary and secondary data. Secondary data sources included periodicals, news papers, and published books.
The questionnaire responses were analysed in percentages, allowing the researcher to allocate and weight each alternative in order to conduct a good comparison study and chose the alternative with the largest percentage.
DETECTION AND PREVENTION OF FINANCIAL FRAUD IN NIGERIAN BANKS PROPOSAL
Fraud is a natural vice. Fraud, according to the Advanced English Dictionary, is something designed to fool, a premeditated deception used to gain an advantage.
It has existed since the dawn of time, even before the advent of money. However, in our still-developing world, where the desire to become rich quickly is on the rise, fraud is becoming common.
Financial fraud is the enticing but misleading presentation of financial transactions in order to steal money from victims. Banks, the stock market, and other financial markets are notorious for fraud. Financial fraud is defined as an attempt to defraud someone for financial benefit by free Dictionary.com.
Bank fraud is a purposeful or conscious endeavour to achieve illicit financial advantage at the expense of another person who is the rightful owner of the fund. If not arrested, the increasing incidence of financial fraud in our bank in recent years may pose certain challenges to the stability and survival of individual banks, as well as the performance of the industry as a whole.
For one point, fraud causes massive financial losses to banks and their clients, depleting shareholder funds and the bank’s capital foundation, as well as a loss of trust in banks. In addition, fraud incidents may force the collapse of some impacted banks, as has occurred in other regions of the world, notably Nigeria.
In this study, I will concentrate on the two main sources of financial fraud: institutional factors and environmental variables.Based on that, the primary goals of this project research are to: determine whether financial fraud exists in Nigerian banks, verify the impact of financial fraud on banks and the Nigerian economy,
discover how computers aid in the commission, detection, and prevention of financial fraud, identify the types and causes of financial fraud, evaluate management controls in the detection and prevention of financial fraud, and review and improve the project.
INTRODUCTION TO CHAPTER ONE
1.1 BACKGROUND OF THE STUDY
The Nigerian banking sector remains an important aspect of the economy. Banks have grown tremendously since the establishment of the nation’s first bank in the nineteenth century. Despite the economic downturn, people prefer to work in banks over other industries because they believe they will find greener pastures there.
Some people go to banks with the intention of making money quickly, and when they are unable to do so, they cheat the banks.
Wherever there is money, there is financial fraud. Banks handle money and hence remain the most vulnerable to fraud. Our daily newspapers are inundated with stories of scams. The rate of fraud is steadily increasing year after year. And new methods of deception are developed. With the growth of technology in the shape of computers, telex systems, and so on, fraud has taken on a new dimension.
Unscrupulous persons operate the computer fraudulently in our banks. It is now possible to transmit large sums of money using the telex technology. The activities of the well-known 419 group should be discussed because this group deals in the exhortation of money from their perpetrators; they usually withdraw a large sum of money and deposit the money they fraudulently gathered from their perpetrators.
Despite the extensive efforts done to combat fraud, it has persisted and reached such frightening proportions that bank notes, checks, and other financial instruments are now forged and traded in the economy. In authoring this project, I hope to uncover areas of fraud that have yet to be found as well as strategies to eliminate fraud.
1.2 STATEMENT OF THE PROBLEM
In recent years, our banks have been subjected to an increased danger of fraud. Many people’s attention has been drawn to banks, either directly or indirectly. Most workers look to banks to solve their problems. People associate identification with banks with success and picture banks as floating in money.
With such motivations, some employees are let down by banks. When they don’t get as much as they expected, most of them resolve to take whatever they can at the first opportunity. Because “opportunity comes but once,” even the seemingly privileged may be or are implicated in deception.
Nigeria’s weak economy comes to mind as well. People are attempting to make ends meet in every way they can. Fraudsters frequently work along with bank personnel to defraud the banks.
Some are imposters who, with the assistance of some bank staff, pretend to be someone they are not and have enormous quantities of money deposited into their accounts. Telex fraud is a new dimension as well.
Although much research has been conducted on fraud, the wave and sophistication of the scourge continues. As we all know, fraud can never be entirely eliminated since some people will always find a method to circumvent the system and commit fraud.
1.3. SIGNIFICANCE OF THE STUDY
Based on what we know so far, this study will have a huge impact on the Nigerian economy as a whole. The banking sector will continue to be an unavoidable part of the economy, and it would be advantageous for it to be run in a highly free and fair manner.
When financial fraud threats are identified, they can help to eliminate the public problem. The study will assist restore people’s trust in banks, as some people are beginning to believe that banks are not what they are supposed to be.
The study will be invaluable to banks. Common risk areas will be highlighted. Effective methods of preventing fraud will be investigated.
1.4 AIM OF STUDY
There are several goals that this study hopes to achieve by doing this research:
1. Determine whether or not financial fraud exists in Nigerian banks.
2. To assess the impact of financial fraud on banks and the Nigerian economy.
3. Determine how the computer contributes in the conduct, detection, and prevention of financial fraud.
4. To identify the many types and causes of financial fraud.
5. To assess management controls in the detection and prevention of fraud.
6. To review and improve previous work in the domain of financial fraud, as well as to provide the groundwork for future study.
7. To demonstrate that banks, through adequate identification and control, can help check the actions of 419 groups as they pertain to banks.
8. To offer solutions to the problem of financial fraud and to develop long-term solutions to the aftereffects of fraud.
HYPOTHESIS FORMULA
The “size” of fraud in a bank branch has no relationship with the “size” of the bank branch. The scope of fraud is defined in two ways: the number of occurrences of fraud and the money involved.
Hypothesis 1 is so formally represented as follows:
Ho: Y1 ≠ F (x)
Y2 ≠ F (x)
Hi: Y1 = F (x)
Where Ho denotes the null hypothesis
H1 = Hypothesis Alternative
Y1 denotes the number of fraud instances per bank.
Y2 = The amount of money involved in each bank’s scam.
Branch
X = Number of employees per bank branch
2. There is no correlation between the “size” of the fraud in a bank branch and the “age” of the bank branch.
Mathematically:
Ho: Y1 ≠ F (P)
Y2 ≠ F (P)
Hi: Y1 ≠ F (P)
Y2 ≠ F (P)
Where P denotes the age of a bank branch (the number of years it has been in operation).
3. That relatively unskilled bank employees are more prone to perpetrate fraud.
Mathematically:
Ho: R ¹ F (q)
Hi: R = F (q)
Where R is the number of fraud instances per staff category.
q denotes the number of years of banking experience.
4. More experienced bankers are more prone to defraud huge quantities of money. That is, bankers with five or more years of experience are more likely to steal ten thousand naira (10,000) or more.
Mathematically:
Ho: A ¹ F (q)
Hi: A ¹ F (q)
What A = the amount of money engaged in fraud (N10,000 and more) each bank branch.
1.6 SCOPE OF THE STUDY
The study focused on commercial and merchant banks in Nigeria. These banks had a total of 1,485 branches, with the central bank of Nigeria filling 1,071 with cases of fraud. Out of the 1,071 bank branches nationally, 12%, or 126, were chosen and surveyed.
To achieve the research aims, the scope of the study was defined to include all essential areas of fraud in banking operations. The number of fraud cases committed in each bank, the various types of fraud,
the amount of loss to banks and customers, the persons involved in fraud, the period of concealment, the incidence of collusion, the causes of fraud, and the level of effectiveness of fraud prevention measures were all obtained.
The study also focused on bank personnel strength, deposit size, loan and advance size, and fraud prevention and detection methods.
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