EVALUATION OF FRAUD CONTROL MEASURES IN THE NIGERIAN BANKING SECTOR. A CASE STUDY OF CENTRAL BANK OF NIGERIA, CALABAR BRANCH”

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ABSTRACT

The study evaluated the effectiveness of fraud control measures in the minimization of fraud incidences in the Nigerian banking sector. The purpose of the study was to establish how the occurrence of fraud can be reduced using fraud control mechanisms. The study adopted the use of both primary and secondary source. The findings ofthe result found a significant positive relationship between staff greed and the level of fraud in banks. This was empirically supported by the statistical results and empirical findings alike. The second finding of the study indicated that fraud controls also positively affected the level of fraud perpetrated in banks. This does not conform to the prior expectation. Naturally, it is expected that implementing fraud control measures will result in a reduction in the level of fraud recorded by banks but the result of the study indicates otherwise. Arising from the findings, it was therefore recommended that Selection process for staff should be more rigorous to ensure that employee with higher propensity to commit fraud are not allowed into the banks; Remuneration of staff should be competitively enhanced while Fraud preventive measures rather than control measures should be put in place in banks to minimize the occurrence or incidences of fraud in banks

CHAPTER ONE

INTRODUCTION

1.1     Background of the study

Fraud is an intentional deception made for personal gain or to damage another individual. Fraud is a crime and civil law violation. Defrauding people of money is presumably the most common type of fraud. Fraud is a threat to an organization’s going concern and its interaction with external stakeholders such as customers, suppliers, financiers and business partners which can result in huge financial damage. Banking industries holds a critical position in the country’s financial system and plays a vital role in the development of a nation’s economy. The banking sector increases the quantum of National savings and investments by being an intermediary between surplus and deficit spending units and hence national output (Ajala, Amuda & Arulogun, 2013).

They influence the level of money supply which is indispensable in the growth of National income and serves as a determinant for the level of the country’s economic activities through availability of credit (Etuks, 2011). Idolor (2010) and Akindele (2011) were of the opinion that banking sectors are the principal depositories of the public monetary savings and also the nerve center of the system of payments, owed with the money creation ability, allocation of financial resources and conduct through monetary and credit policies. Adeyemo (2012) opined that the success of any monetary and credit policy depends on the state of health of banking institution through which the policy are implemented. This means whatever issues or problems that go against the free flow or proper functioning of the sector will have a strong effect on other sector of the economy. Base on this, it is therefore of a great importance to quickly prevent or diagnose any factor that can hinder the smooth running of the banking sector.

Customers of banks are currently experiencing increase in fraud schemes. Scams to get a customer personal information can occur through many different means such as email and telephone. Bank fraud is the use of fraudulent means to obtain money, assets, or other property owned or held by a financial institution. In many instances, bank fraud is a criminal offense, while the specific elements of particular banking fraud law vary between jurisdictions; the term bank fraud applies to actions that employ a scheme as opposed to bank robbery or theft.

Controlling bank fraud in the financial sector is a task for all the stakeholders in the sector. Every year, banks lose billions of naira to fraud which comes in all sizes and shapes both from internal employee and external perpetrators. Fraud at times can be in form of theft, misappropriation of assets and even manipulation of records and mostly backed-up by concealment of the theft. In other word, it is the conversion of stolen properties or resources. Onibudo (2007) concludes that for fraud to occur there must be three elements which he referred to as “WOE”. This “WOE” mean the will, opportunity and exit (escape route), that is in-turn referred to as the fraud triangle, which is the perceived pressure, perceived opportunity and rationalization. Fraud is not peculiar to banking industry alone, it is a general phenomenon. Some multinational organizations such Enron, Worldcom etc. has been affected negatively due to fraud occurrence, therefore many organizations has made so many attempts to restore their goodwill and images by instituting ethical guidelines and code of ethics to prevent unethical behavior. Bank fraud can be committed in so many ways and most of the times it involves both insider (employee) and outsiders coming together to successfully commit an unethical behavior.

 In its broadest sense, fraud means obtaining something of value through deception. If fraud were described as an industry, it would clearly be one of the fastest growing areas of the economy. One harden criminal who have several period of jail term for armed robbery offence was recently reportedly to have said that he wish he understood earlier in his criminal career how easy it was to commit fraud. He now considered that fraud is less traumatic with far greater rewards while penalties are substantially fewer than other forms of crimes. This study will address those forms of fraud that targets the financial service sector and how the industry has responded with some measures successfully in controlling this ever increasing problem and other measures that can be geared towards achieving further results.

EVALUATION OF FRAUD CONTROL MEASURES IN THE NIGERIAN BANKING SECTOR. A CASE STUDY OF CENTRAL BANK OF NIGERIA, CALABAR BRANCH”