A CRITICAL ANALYSIS ON FRAUD IN NIGERIAN FINANCIAL INSTITUTION
The particular time of fraud and forgeries in the Nigerian banking systems are indications of weakness in bank, internal controls systems and erosion of moral and ethical values in the country. Frauds and forgeries undermines the safety, soundness and satiability of banking systems hence the special concern shown by government, the Central Bank of Nigeria (CBN).
Most criminologist agrees that the aims for fraudulent behaviour is caused by some act, or factors, as agreed, extreme leant often character is as dire needs, pathological desire to be with the joins, societal demand or the cultivation of task to expensive for the legitimate income of the individual.
Another theory of fraud state that bank have been the major targets for the fraudsters because banks have seen as the rashest organization in any country.
Socio-economic lapses in the society such as misplacement of social expectations as contributing to fraud. This was identified” by Adewumi (1996). Since there is corruption in all factors of the Nigeria life, banks cannot be an exception, because Ogobede (1989) like Adewumi opined that the main causes of fraud in banks in Nigeria are traceable to the general dishonesty in the society.
2.1 TYPES OF FRAUD
Fraud in bank need a high vigilance, experience and knowledge to be able to identify them dubious acts. The return from the reporting banks revealed that most common types of reported that fraud and forgeries were the following: –
- presentation of forged cheques
- fake payment
- PRESENTATION OF FORGED CHEQUES
Forgeries are criminal privacy of either a document or mandate or both. It be forgery of customers cheques, bank drafts, costumers signature or signature of a bank official.
It can be formed, targeted on current account, savings accounts or deposit account or even transfer etc. the main objective of fraudsters are to under false presentation, as to present genuine and original what are false and fake.
- FAKE PAYMENT
This type of fraud is when a cashier introduce or bring spurious cheques into his cage without a concern of other members of staff or non customers and pays as cash. This types o fraud is easy to detect out other corseting or auditing the work done after the day through examine the vouchers.
- CAUSES OF FRAUD
Some causes fraud in the financial institutions are
multidimensional and independently a criminal cheque exist which specializes in bank fraud and can unleash its heinous.
Customers alone some times are in valued and in other care of staff done. It could as well be as amalgam of the effort of the three groups Ahmed (1996). Fraud could also planned and matured outside the banking system or inside the system or both. According to Ahmed (1996) that limon, they include:
- POOR INTERNAL CONTROL
The prevalence of frauds and forgeries in the Nigeria banking systems are indication as it has been mentioned several times of weakness in banks internal controls, system, that was said according to (NDIC) Nigeria Deposit Insurance Co-operation 1998 report. Where internal control are lacking or although in existence, they are ineffectively applied, there are bound to be loopholes that will serve as a fertile ground to pretreated fraud. Also where the system of internal control does not provide for effective monitoring of compliance there is likely to be an abuse.
- POOR BOOK-KEEPING AND ACCOUNTING PROCEDURE
This financial institutions, maintenance of sound book-keeping record and necessary to unhealthy middle soreness lack of daily audit, call over and scrutiny of vouchers and entries. The ideal must provide daily reconciliation vouchers authorization and scrutiny.
- INADEQUATE JOB ROTATION
A situation where by a staff is allowed to stay too long on a particular job provide chance of fraud. Moreover, where job or duties are suppose to perform by different individuals are accumulated into one job and given to staff to perform such condition give, rise or opportunity to fraudulent act.
- INEFFECTIVE MANAGEMENT
When a corruption or ineffective management in field supervision or control, planning and co-ordination which is perfume by poor judgment promote fraudulent behaviour.
- FAULTY ACCOUNT OPENING PROCEDURES
Because of the lack of a conformity with account, the so-called 419ners been given an opportunity to operate e.g. failure to carry out research or to audit at the corporate customers, not visiting business premises at the onset and surprise visit, afterwards, or non-authentication of signatures on mandate or absence or passport photography can cause or encourage fraudulent act.
- EFFECTS OF FRAUD
The strategies and leading in the nations economy is enough
explanation way. Fraud have it effects on its eviction, like other crime has i.e. damaging effect, fraud has penetrated all aspect of our societal life, it also has areas to be modest for reading. Therefore we will centre on the effect of the fraud generally on bank and insurance companies, the banking public, the economy and the nation image.
EFFECTS OF FRAUD IN BANKS AND INSURANCE COMPANIES
Incident of fraud in a bank or insurance no doubt normally shares the forgeries of the management system and heightens fears and suspicion among the staff.
In some of the reported cases the amount in valued to say the least is staggering. According to the Nigeria Deposit Insurance Co-operation 1998 Annual Report and Statement of Accounts, the number of reported cases of fraud and forgery increased significantly.
According to 1998 report over 679 cases were as against 417 in 1998. Similarly both the amount involved and the actual or expected loss increased from their 1996 level. According to the above statistical do not include the loss in merchant and insurance companies huge some of money where putting in fraud and forgeries and most case eat too deep into capital based of the effected banks that hey go insolvent and consequently may become liquidated. An example in the case of BCCI Nigerian limited that want underground in 1998 due to large scale fraud. Working forwards various tribunals across the country indicate that most of the distressed banks in Nigeria were mainly as a result of one from the frauds or the other.
EFFECT OF FRAUD ON THE BANKING PUBLIC
The public mostly because of fear of fraud in the banking sector transacts business tem in cash instead of using bank instrument thus exposing them to the danger of either been killed or rubbed of their money, which they would have save in the bank. Also fraud has force bank management to be cautions in granting loans and facilities customers. As a result of some, “genuine borrowers may have their request turned down or over delayed and in most cases, thus may cause the customers to loss the business he or she intends to use the money for.
EFFECT OF FRAUD IN THE ECONOMY
The standard of living of majority of Nigerians depend upon the economic development and growth of the country which is turn depends on its stability. When the banking industry in crises as result of frauds among others a nation’s income can be reduced and this may lead to recession and economic depression on the flow of frauds.
This adversely affects the commerce, industry, agriculture, social amenities etc. and the result is general suffering, unemployment, high rate of illiteracy etc.
High incidence of fraud discourages forgeries from participating in business venture in Nigeria. The belief of the western countries is the Nigerians are fraudulent is responsible of low involvement of their nationalities in abundant business opportunities in the country which the economy needs for its growth and stability.
- STABILITY AND THE LAW
In Nigeria, fraud and forgeries are multidimensional and
equally so in the require effort if we are to see a reduction in the crime wave. The federal government of Nigeria is not relenting in its efforts to control and prevent frauds. Since it has bring out administrative and legislative measures in checkmating the activities to fraudsters ignore financial institution, as (Sanusi 1994) mightily pointed out the easiest way to ensure that the generality of people and financial institution obey laid down regulation is to demonstrate that the consequences lf violation is high and sections wherever the need arises.
Federal government, the legislative promulgated several laws and decrees to check the activities fo fraudsters and whenever fraud occurs of bring the perpetrators to book. The federal government promulgated Decree No.20 of 1994 and No.27 of 1986.
There was special tribunal offences to try cases considered to be economic, sabotage. These decrees were not without inadequacies and the desire objective are not fully realized. Come to the failed banks “Recovery of Debts and Financial malpractice’s in the bank” decree No.18 of 1994 which was amended by an amendment took care of the shortcomings of the previous decree and so far is more comprehensive. The federal government has set up tribunals in some parts of the country to try offenders under the decree. Mean while, managers, directors, supervisors, accountants, clerks operate entrepreneurs and individuals are being charged for various fraudulent acts in these tribunals.
- INVOLVEMENT OF OUTSIDERS AND INSIDERS
INVOLVEMENT OF OUTSIDER: CUSTOMERS PROPER CUSTODY OF INSTRUMENT AND SPECIMEN SIGMATURE
In the bank customers own the bank a duty to ensure that their instrument of instruction cheque book and withdrawal saving slip are at all time properly kept secured and access therefore by unauthorized person made impossible customers signature which constitutes the mandate, should be serious protected so as not to give room for limitation by dubious individuals.
INVOLVEMENT OF INSIDER “BANK”
The management has the responsibility outline on effective system of internal control. When this is in place, it has to be ensured that this system works and is being seen to work. Proper book-keeping is a prerequisite to an effective system of internal control. Where books are unbalanced for a sustained long period, a lot of mal-practice could go undetected. Other control measure such as snap checks, periodic but regular audit, job segregation, dual central our assets etc. could go a long way in reducing fraudulent practices.
Stating policy should aim at identifying and fraud eaten positive or otherwise in individuals rather than paper qualification connection or irrelevant experience.
- ARTICULATED SOLUTION TO FRAUD
SOLUTION TO FRAUD BETWEEN BANKS
The rule of Central Bank of Nigeria state that the present bank are responsible for ensuring that all document such as cheques, drafts, banker payment etc. persuaded through the clearing house are conceivable research, thus implies that collecting or presenting banks will beheld liable if it collects negligently “Ovuakorie” (1994).
To forestall fraud between banks, the following measure are recommended by both Ovuakporie and Y.M. Ahmed.
CAUTION NOTICE ON INTER-BANK INSTRUMENT
The collecting banks should put the paying on notice of any unusual lodgment. The abnormality could be that the amount involved is usually large new account involved.
CONTROL OVER INTER-BANK INSTRUMENT
Strict control must be exercised over all inter bank instrument during and after the operations should be closely monitored by means of register while untreated items must be kept under dual control in the strong room overnight.
STRICTLY ADHERENCE TO CLEARING HOUSE RULES
The provision of the clearing days of various account should a bank accept returned instrument after the stipulated clearing day accept where the Central bank clearing house and the paying bank monitor the movement of the instrument to be substituted until their aim is achieved.
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