Effects of Fraud in the Banking Industry (a Case Study of Union Bank Nigeria Plc)
CHAPTER ONE
OBJECTIVES OF THE STUDY
The purpose of this study is to show the various fraudulent practices in the banking industry and the perpetrators of this act and to expose what the law has to do in such situations.
Although a number of studies have been undertaken on the phenomenon of fraud in banks, the increasing pace with which frauds are being committed called for continuous research on the subject to keep track of new devices employed by the fraudsters in defrauding the system, hence the rationale for this research work.
To achieve this objective, the following secondary objectives have been specified.
- To identify the cause(s) of fraud in banks,
- To identify the various types of fraud perpetrators in banks,
- To identify the various means employed in defrauding banks,
CHAPTER TWO
LITERATURE REVIEW AND CONCEPTUAL ISSUE
INTRODUCTION
Fraud impacts on individuals, institutions, corporations and the economy of a nation, thus it leas capital flight and erodes public confidence in the country’s financial system. Banks (mainly Commercial Banks) are deposit institutions for the safe keeping of customer’s monies, but now-a-days, Banks serve as the way of having unlawful gain to the detriment of another. The unfair dealing or shady deals whether against the bank by its customers or against the customer by the Bank (including its officers) or against the bank by its officers is regarded as fraud.
In Nigeria, fraud in the banking industry is no longer an astonishing news. Nigeria have the tendency of hailing wealthy citizens, awarding them with chieftaincy titles and front seats in important occasions. The manner in which we recognize wealthy people in our various communities without the success of their wealth has even made matter worse.
Thus, many young and talented men and women engaged in drug trafficking and committing frauds because our society do not condone these but also encourage them singing songs of praise in their honour, making them chairmen at functions naming halls after them in the universities, naming streets and highways in villages and towns. These have been the factors that encourage people to seek wealth by all means including Bank fraud.
Experience from some of the distressed banks in Nigeria in recent years, has shown that some of these banks through fraud and bank malpractices cannot fully provide for losses sustained. Among the fraudulent practices that have wrecked financial institutions are blotting of account number and cheque numbers, forging of signature, transfer of customer lodgement of staff accounts and fraudulent manipulations of CBN clearing cheques. Others include presentation of forged mail, raising spurious vouchers and organized loss of banks many to armed robbers.
Irokaibe G. (1995). Slated that these types of fraud are referred to as corruption and economic crime, which possess identical xtics that clearly distinguish them from other classes of crimish offence.
CHAPTER THREE
HISTORICAL BACKGROUND OF UNION BANK
Union Bank of Nigeria Limited, one of the leading commercial banks in Nigeria celebrated its 70th anniversary in June 1987. After being authorized by the banking of 1916, Union Bank of Nigeria Limited then known as the Colonial Bank opened for business in Nigeria in the year 1917 with the first branches in Lagos, then Jos and Port Harcourt.
In 1981, more branches were opened at Ebute Metta, Ibadan, Kano, Onitsha, Zaria and Burutu in 1921. In 1925 Barclays Bank , Dominion Colonial and overseas was formed to take over the activities of the Colonial Bank along with two other British banks. For the next 25 years only three (3) offices at Aba, Gusau and Ijebu –Ode were added to the existing nine branches.
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
INTRODUCTION
This chapter will attempt to examine the cases of frauds and forgeries over some period to evaluate the trend in the malpractices. It will also consider the numbers and category of bank staff that are involved and the extent and effects of these frauds and forgeries on the banking industry. Mention will also be made of the efforts of the regulatory bodies are making to prevent these nefarious or wicked activities. Attempt will also be made to examine the failed bank decree and then the Bank Distress, causes, effect and distress resolution options.
CHAPTER FIVE
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
SUMMARY
This research work has been undertaken with an objective in mind to enquire in the disturbing issue of banks fraud as a whole, and ways of prevention and control of frauds with more emphasis of commercial banks.
In the introductory chapter, the significance of banking industry in an economy was highlighted and thereafter, the long run effect of incidents of fraud within the Banking Industry was equally emphasized. The object of the study its scope and limitation also state.
The second chapter effort was made to review relevant literature existing in the area. Attempt was also made the lo trace the nature and dimension, prevention and control of fraud, importance of timely fraud detection, and statutory consideration for fraud commission and lastly responsibility of fraud detection.
CONCLUSIONS
With banking industry recording unprecedented growth, the need to establish strong and adequate measures to identify fraud and proper solutions to the endemic problem, like on control measures to be established. Although it is unfortunate that the prevailing materialistic values of the society have made many officials throw away banking ethics to the dogs, a reawakening needs to be done by the industry through organized training and code of behaviour.
The present trend of fraud in the industry in Nigeria whereby Directors have to be arraigned before special tribunals in order to recover ill gotten loans and eroding the confidence of both indigenous and foreign investors in doing business via the banks. Conclusively, though it may appear to be forthandly for one to believe that fraud cannot be eradicated completely, nevertheless, it can b e reduced to the barest minimal if only strict measures are taken.
RECOMMENDATIONS
The object of any study (inquiry) which requires in depth exploitation of a problem is to make recommendations, the following suggestions are raised a possible solution to fraud prevention and control when followed.
- Adequate training and re-training of staff should be regular. The training should emphasis the responsibilities and loyalties of the staff to the
- Screening of bank staff: Bank workers must be screened to make sure that those who authorized payment of money are
- It is in fact worthy of mention that bank “MUST” observe and down Banking procedures if only to reduce incidences of fraud and
- Payment to third parties across the counter must be properly checked, particularly when third party is not well known to the bank.
The Central Bank of Nigeria also has some useful suggestions on how fraud can be prevented and control in Commercial Banks. These includes:
- No person shall be employed in a bank without a satisfactory reference from their preciousemployers
- Reference must be made to the banker’s committee data bank before any person whose appointment was terminated or was forced to resign is employed.
- CBN should impose penalties on banks which make no return on staff who leave their services each month as a result of dismissal orretirement.
BIBLIOGRAPHY
- Central Bank of Nigeria Research Bullion Publication (1997) Vol.21 No.2 April/June
- Sanusi J. (1986) “Management Control Systems and the Prevention and Detection of Frauds in Nigeria” (ED)1986
- Iyiegbuniwe (1995) “The Socio-economic and Financial Environment of Fraud” Paper presented at workshop on fraud prevention and control organized byResman.
- Bank Administration Institution (1988) “Fraud Prevention and Detection Series” First Chicago (The First National Bank ofChicago)
- Ekechi, A.O (1990) “Frauds and Forgeries in Banks: Causes, Types and Prevention” presented at the National Seminar in Bank Audit Organised by ICAN in
- Sanda B.A. (1994) “Understanding the Nature, Structure and Dimension of Fraud in Banks and Financial and Administrative System, being a paper presented at a workshop organized by Michael Sttevens and Associates,
- Eliot R.T. etal (1984) “Management of Fraud Detection and Defence” Petrocell Books Diconpt. New York, USA. (Pg. 331 -347)
