MANAGEMENT OF FRAUD IN NIGERIA FINANCIAL INSTITUTIONS WITH PARTICULAR REFERENCE TO BANKS AND INSURANCE COMPANIES (A SURVEY OF BANKS AND INSURANCE COMPANIES IN ENUGU METROPOLIS)
MANAGEMENT OF FRAUD IN NIGERIA FINANCIAL INSTITUTIONS WITH PARTICULAR REFERENCE TO BANKS AND INSURANCE COMPANIES (A SURVEY OF BANKS AND INSURANCE COMPANIES IN ENUGU METROPOLIS)
ABSTRACT
The work was designed to study the management of fraud in Nigeria financial institutions with particular reference to banks and insurance companies.
Fraud is an veil in the society and does a lot of harm to any organization where it is committed. The said fraud has caused a devastating experience to several financial institutions in Nigerian society.
However, the upsurge in the perpetration of fraud has made it necessary for the government to promulgate law mandate financial institutions to submit the case of fraud encountered in their organisations to the Central Banks.
Fraud has gone “nuclear” in sophistication and often unveils itself in diverse cases which in most cases beats man’s imagination whenever it occurs and makes it detection and control very difficult.
The first chapter of this project deal with introduction, which identifies many definitions of fraud. And other historical background, statement of problem, objective of study, hypothesis, significance of study, and scope of the study.
Chapter two deals with literature review which includes; concept of fraud, the law and fraudulent practices, types of fraud and causes of fraud, theory of fraud, its effects and fraud in insurance industry.
Research design and methodology were treated in chapter three while chapter four deals with presebtation and analysis, testing of hypothesis and interpretation results.
Finally, chapter five deals with recommendations, conclusion, and discussion of findings.
By and large, it is hoped sincerely that this work will provide to whoever that may be interested in making use of it, the necessary detailed knowledge on fraud control and its detection.
CHAPTER ONE
1.0 Introduction 1
1.1 Statement of problem 4
1.2 Objective of study 6
1.3 Hypotheses 7
1.4 Significance of study 8
1.5 Scope of limitation 8
1.6 Definition of terms 10
CHAPTER TWO
2.0 Literature review 12
2.1 Introductions 12
2.2 Concept of fraud 12
2.3 Causes of fraud 14
2.3.1 Institutional causes of fraud 15
2.3.2 Environmental/social causes 19
2.4 Extent of bank fraud 22
2.5 Nature and types of bank fraud 25
2.6 The law and fraudulent practices 36
2.7. Types of banks and their functions 38
CHAPTER THREE
3.0 Research design and methodology 54
3.1 Introductions 54
3.2 Target of population 55
3.3 Method of data collection 56
3.4 Validity and reliability of measuring
Instrument 57
CHAPTER FOUR
4.0 Data presentation and analysis 65
4.1 Presentation of data 65
of responses in different institution 66
CHAPTER FIVE
5.0 Findings, conclusion, recommendations 108
5.1 Discussions of findings 108
5.2 Conclusion 109
5.3 Recommendation 110
Bibliography 114
CHAPTER ONE
Fraud is a term known in all the nooks and cranny in Nigeria. Little children in primary school need on explanation of the subject, this fraud itself has eating deep into the fabrics of our society. The only remedy to this ugly situation will be God’s intention, otherwise the wave of this mode decadence will persist.
What is fraud? Some well-read individual have tried to bring subject home in a better language for easy understanding. For example, Mr. Okorie Onovo ACA Director school of financial studies, IMT Enugu, defined fraud in his book understanding practical Auditing and investigation, as irregularities involving the use of criminal deception to obtain unjust or illegal advantage. The word irregularities is used to refer to intentional distortion of financial statements for whatever purpose and misappropriation of Assets
MC Donnel (1952) says that “fraud in the contemplation of civil court of justice may be said to include all act of omission and concealment, justly reposed and are injurious to another or by which undue or unconscientious advantage is taken of another”
Adewumi (1992) described fraud as a “conscious premeditated action of a person or group of person with the intention of selfish or personal monetary gain”. It involve the use of deceit and trick and sometimes highly intelligent canning and know-how. The action usually takes the from of fargery, falsification of document outright theft.
Fraud in it entirety implies a willful act on the part of anyone whereby another is sought to be deprived by illegal or inequitable means what he is entitled to (Mc Donnell 1952)
The above definition is not enough to express what fraud is to the reader, but can at least give a vivid definition of the term, because it contain the fundamental of fraud which include.
Harry West (1952) says that “no one is entirely immune to fraud. It crop up in small and large amount it is perpetrated by management, both senior and junior employees, to be victim of fraud is other a deciasaffing experience”. Whenever fraud is mentioned, one thinks of loss of money in financial institutions like banks and insurance companies.
In the 1960s, bank and insurance fraud are not common as it is today in our society. Indeed the causes of frauds are not far tetched. The establishment of banks and more insurance companies with continuous concomitant of over stretch of staff recourses and accordingly, the weakness in the system of control brought above irregularities in the system. The result of this is the speed at which fraud in banking and insurance company has risen.
According to Nigeria Deposit Insurance Corporation (NDIC) about 330 frauds related cases were reasoned in the banking industry per month in the year by the end of July 1991. This number has increased monthly since then. The amount lost to fraud in the industry between 1987 and 1991 only was estimated at N640 million (Uduk 1992).
Commercial fraud covers multitude of malpractice inducing such “with collar crimes” as obtaining credit with oat intending to pay, obtaining money in mail- order business without supplying the goods, obtaining money by promising to invest and not doing so, obtain by computer fraud, insiders trading and tax fraud. It into a “corporate crime” where business people commit crimes against other investor or the tax authorities or where directors commit fraud against companies.
Fraudstars involve themselves in fraudulent activities so as to be reckoned with in the society as those who have made it or as they pat it “crème dela crème” of the society. The loss of funds assets through fraud reduces resources available for use in bank and insurance company operations.
This has really devastated the economy of this country.
According to Adkaye (1986) in Nigeria, it became very apparent of the barking ordinance of 1952 and subsequent, barking ordinance, the practice of fraud still increasing in an alarming rate.
This has led to the close down of some bank like many other now NDS’s list of liquidation.
Considering the up-short in the rate of frauds hence the study of causes, effect, control and possible solution to this special crime in our bank and insurance companies.
Customer are induly delayed in bank as the banking officers painstakingly tore various internal control check, with the customer checks and pass-books in a bid to avoid any possible dishonest presentation by the customer or other staff. It takes a longer time to complete the banking and insurance circle as a result are no longer honored at sight.
Banks now reject their own apparatus the instrument that lent them credence and insist on letter of confirmation before cheques investing huge amount are honored.
Our common says today is that this fraud here and there is no longer a new thing. It is a painful saying of untold story of hardship to our people collecting and individually. In some instances. It is the bank staff who have collaborated with customers other time it is the staff unaided. Some of there fraud are intelligently planned that you can hardly findout.
The confidence which the public has in bank and insurance companies, are gradually fading away like the dew of the day. There is yet a reason to fight fraud to uphold the trust of the public.
In recognition of the above facts, the study intends to investigate types of frauds, it culprits and possible effect of fraud in Nigeria financial institution and make useful recommendation and suggestion that will help in limiting entirely the fraud act in our society.
In recognition of the above facts, and in order to achieve the objectives, the study proposes the following:-
Fraud is very often committed by people in relatively trusted position who have the opportunity as part of their day to day work. The advantage of this opportunity is what they consider as being a way they can get away with something. What next? Possible ways are being sought through which they can exploit these things or have those things removed. In the nutshell the seed is sown by the opportunity.
However, this work will be of immense help to financial institutions in Nigeria in particular and to all, that may have need for assistance in detection of these opportunities in general.
The study covers some commercial banks, insurance companies and Central Bank of Nigeria (CBN) situated in Enugu.
The reason for choosing banks and insurance companies among all financial institution for this study is that these two institutions occupy a critical position in the complex financial system that supplies the money and credit needs of the economy.
The information used for the analysis covered the seven year period between 1990-1997. In order to attain the objectives of this research, the scope of the study was define to embody all relevant aspects of fraud in banking and insurance operation. Information was obtained on the fraud cases perpetrated in each bank and insurance company, the different types of fraud and the frequency of each, the amount of loss to banks and customers, the period of concealment, the incidence of collusion, the cause of fraud and the level of effectiveness of fraud preventive measures. The study also focused on areas relating to the staff strength, bank size of deposit, size of loans and allowances, years of banking experience of fraud stars, the means of fraud prevention and detection and the punishment to be meted out to fraud stars.
Finally, the term “Bank” often used in this study refers to a variety of financial institutions. The type of crimes described in this study occur in banks. Thrifts, insurance companies and other types of financial institution.
1.6 DEFINITION OF TERMS
The definition of terms is an important fact in research report. Since without proper understanding of essential terms, the value of the research may be cost through misunderstanding.
Though most terms used in this study are used in their general usage and so needed no deflation for the purpose of this research the following terms are defined.
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COMPLETE MATERIAL COST N2,500 Or $10. FRESH PROJECT MATERIAL COST 50,000 NAIRA FOR UNDERGRADUATE, OTHERS 100,000 -200,000 NAIRA.
THE NATURE AND CONSEQUENCES OF JUVENILE DELINQUENCY IN NIGERIA: A STUDY OF ENUGU NORTH LGA, ENUGU STATE
Foreign Transaction For Dollars Payment :
Bank Name: GTBank
Branch Location: Enugu State,Nigeria.
Account Name: Chi E-Concept Int’l
Account Number: 0117780667.
Swift Code: GTBINGLA
Dollar conversion rate for Naira is 175 per dollar.
ATM CARD: YOU CAN ALSO MAKE PAYMENT USING YOUR ATM CARD OR ONLINE TRANSFER. PLEASE CONTACT YOUR BANK SECURITY FOR GUIDE ON HOW TO TRANSFER MONEY TO OTHER BANKS USING YOUR ATM CARD. ATM CARD OR ONLINE BANK TRANSFER IS FASTER FOR QUICK DELIVERY TO YOUR EMAIL . OUR MARKETER WILL RESPOND TO YOU ANY TIME OF THE DAY. WE SUPPORT CBN CASHLESS SOCIETY.
OR
PAY ONLINE USING YOUR ATM CARD. IT IS SECURED AND RELIABLE.
form>DELIVERY PERIOD FOR BANK PAYMENT IS LESS THAN 24 HOURS
CALL OUR CUSTOMERS CARE OKEKE CHIDI C ON : 08074466939,08063386834.
AFTER PAYMENT SEND YOUR PAYMENT DETAILS TO
08074466939 or 08063386834, YOUR PROJECT TITLE YOU WANT US TO SEND TO YOU, AMOUNT PAID, DEPOSITOR NAME, UR EMAIL ADDRESS,PAYMENT DATE. YOU WILL RECEIVE YOUR MATERIAL IN LESS THAN 2 HOURS ONCE WILL CONFIRM YOUR PAYMENT.
WE HAVE SECURITY IN OUR BUSINESS.
ABSTRACT
The work was designed to study the management of fraud in Nigeria financial institutions with particular reference to banks and insurance companies.
Fraud is an veil in the society and does a lot of harm to any organization where it is committed. The said fraud has caused a devastating experience to several financial institutions in Nigerian society.
However, the upsurge in the perpetration of fraud has made it necessary for the government to promulgate law mandate financial institutions to submit the case of fraud encountered in their organisations to the Central Banks.
Fraud has gone “nuclear” in sophistication and often unveils itself in diverse cases which in most cases beats man’s imagination whenever it occurs and makes it detection and control very difficult.
The first chapter of this project deal with introduction, which identifies many definitions of fraud. And other historical background, statement of problem, objective of study, hypothesis, significance of study, and scope of the study.
Chapter two deals with literature review which includes; concept of fraud, the law and fraudulent practices, types of fraud and causes of fraud, theory of fraud, its effects and fraud in insurance industry.
Research design and methodology were treated in chapter three while chapter four deals with presebtation and analysis, testing of hypothesis and interpretation results.
Finally, chapter five deals with recommendations, conclusion, and discussion of findings.
By and large, it is hoped sincerely that this work will provide to whoever that may be interested in making use of it, the necessary detailed knowledge on fraud control and its detection.
CHAPTER ONE
1.0 Introduction 1
1.1 Statement of problem 4
1.2 Objective of study 6
1.3 Hypotheses 7
1.4 Significance of study 8
1.5 Scope of limitation 8
1.6 Definition of terms 10
CHAPTER TWO
2.0 Literature review 12
2.1 Introductions 12
2.2 Concept of fraud 12
2.3 Causes of fraud 14
2.3.1 Institutional causes of fraud 15
2.3.2 Environmental/social causes 19
2.4 Extent of bank fraud 22
2.5 Nature and types of bank fraud 25
2.6 The law and fraudulent practices 36
2.7. Types of banks and their functions 38
CHAPTER THREE
3.0 Research design and methodology 54
3.1 Introductions 54
3.2 Target of population 55
3.3 Method of data collection 56
3.4 Validity and reliability of measuring
Instrument 57
- Sampling method 58
- Method of statistical analysis 63
CHAPTER FOUR
4.0 Data presentation and analysis 65
4.1 Presentation of data 65
- Distribution of questionnaire and analysis
of responses in different institution 66
- Hypothesis testing 95
- Interpretation of results 103
CHAPTER FIVE
5.0 Findings, conclusion, recommendations 108
5.1 Discussions of findings 108
5.2 Conclusion 109
5.3 Recommendation 110
Bibliography 114
CHAPTER ONE
INTRODUCTION
Fraud is a term known in all the nooks and cranny in Nigeria. Little children in primary school need on explanation of the subject, this fraud itself has eating deep into the fabrics of our society. The only remedy to this ugly situation will be God’s intention, otherwise the wave of this mode decadence will persist.
What is fraud? Some well-read individual have tried to bring subject home in a better language for easy understanding. For example, Mr. Okorie Onovo ACA Director school of financial studies, IMT Enugu, defined fraud in his book understanding practical Auditing and investigation, as irregularities involving the use of criminal deception to obtain unjust or illegal advantage. The word irregularities is used to refer to intentional distortion of financial statements for whatever purpose and misappropriation of Assets
MC Donnel (1952) says that “fraud in the contemplation of civil court of justice may be said to include all act of omission and concealment, justly reposed and are injurious to another or by which undue or unconscientious advantage is taken of another”
Adewumi (1992) described fraud as a “conscious premeditated action of a person or group of person with the intention of selfish or personal monetary gain”. It involve the use of deceit and trick and sometimes highly intelligent canning and know-how. The action usually takes the from of fargery, falsification of document outright theft.
Fraud in it entirety implies a willful act on the part of anyone whereby another is sought to be deprived by illegal or inequitable means what he is entitled to (Mc Donnell 1952)
The above definition is not enough to express what fraud is to the reader, but can at least give a vivid definition of the term, because it contain the fundamental of fraud which include.
- There must be decent through motive immaterial.
- There must be damage to the person deceived. Infact, where there is money, there is bound to be fraud.
Harry West (1952) says that “no one is entirely immune to fraud. It crop up in small and large amount it is perpetrated by management, both senior and junior employees, to be victim of fraud is other a deciasaffing experience”. Whenever fraud is mentioned, one thinks of loss of money in financial institutions like banks and insurance companies.
In the 1960s, bank and insurance fraud are not common as it is today in our society. Indeed the causes of frauds are not far tetched. The establishment of banks and more insurance companies with continuous concomitant of over stretch of staff recourses and accordingly, the weakness in the system of control brought above irregularities in the system. The result of this is the speed at which fraud in banking and insurance company has risen.
According to Nigeria Deposit Insurance Corporation (NDIC) about 330 frauds related cases were reasoned in the banking industry per month in the year by the end of July 1991. This number has increased monthly since then. The amount lost to fraud in the industry between 1987 and 1991 only was estimated at N640 million (Uduk 1992).
Commercial fraud covers multitude of malpractice inducing such “with collar crimes” as obtaining credit with oat intending to pay, obtaining money in mail- order business without supplying the goods, obtaining money by promising to invest and not doing so, obtain by computer fraud, insiders trading and tax fraud. It into a “corporate crime” where business people commit crimes against other investor or the tax authorities or where directors commit fraud against companies.
Fraudstars involve themselves in fraudulent activities so as to be reckoned with in the society as those who have made it or as they pat it “crème dela crème” of the society. The loss of funds assets through fraud reduces resources available for use in bank and insurance company operations.
This has really devastated the economy of this country.
- To check the menace of fraud, of
- 1952 means to protect the depositions
According to Adkaye (1986) in Nigeria, it became very apparent of the barking ordinance of 1952 and subsequent, barking ordinance, the practice of fraud still increasing in an alarming rate.
This has led to the close down of some bank like many other now NDS’s list of liquidation.
Considering the up-short in the rate of frauds hence the study of causes, effect, control and possible solution to this special crime in our bank and insurance companies.
1.1 STATEMENT OF PROBLEM
Customer are induly delayed in bank as the banking officers painstakingly tore various internal control check, with the customer checks and pass-books in a bid to avoid any possible dishonest presentation by the customer or other staff. It takes a longer time to complete the banking and insurance circle as a result are no longer honored at sight.
Banks now reject their own apparatus the instrument that lent them credence and insist on letter of confirmation before cheques investing huge amount are honored.
Our common says today is that this fraud here and there is no longer a new thing. It is a painful saying of untold story of hardship to our people collecting and individually. In some instances. It is the bank staff who have collaborated with customers other time it is the staff unaided. Some of there fraud are intelligently planned that you can hardly findout.
The confidence which the public has in bank and insurance companies, are gradually fading away like the dew of the day. There is yet a reason to fight fraud to uphold the trust of the public.
In recognition of the above facts, the study intends to investigate types of frauds, it culprits and possible effect of fraud in Nigeria financial institution and make useful recommendation and suggestion that will help in limiting entirely the fraud act in our society.
- OBJECTIVE OF STUDY
The objective of the study are:-
- To find out the causes of fraud in our financial institution
- To examine different types of fraud
- To develop a much greater awareness of damages which fraud can and does to business of all kind
- To make recommendation and proffer likely solutions for the management of fraud in our financial institutions.
- HYPOTHESIS
In recognition of the above facts, and in order to achieve the objectives, the study proposes the following:-
- That non-rotation of staff create an opportunity for fraud.
- That ineffective internal control system gives rise to fraudulent practices.
- That poor employment policy, recruiting and unqualified staff on favour basis causes fraud
- That the confidence and trust of the customer in the solvency, reliability and futures of the financial institutions have been reduced.
- That computerization of banking and insurance services minimizes the incidence of fraudulent activities.
- That poor salary and insufficient total benefit stimulate fraudulent practice.
- That many years of service by a staff in a branch induces fraudulent practices.
- That lust for wealth accounts greatly for fraudulent practice.
- SIGNIFICANCE OF THE STUDY
Fraud is very often committed by people in relatively trusted position who have the opportunity as part of their day to day work. The advantage of this opportunity is what they consider as being a way they can get away with something. What next? Possible ways are being sought through which they can exploit these things or have those things removed. In the nutshell the seed is sown by the opportunity.
However, this work will be of immense help to financial institutions in Nigeria in particular and to all, that may have need for assistance in detection of these opportunities in general.
- SCOPE AND LIMITATION OF THE STUDY
The study covers some commercial banks, insurance companies and Central Bank of Nigeria (CBN) situated in Enugu.
The reason for choosing banks and insurance companies among all financial institution for this study is that these two institutions occupy a critical position in the complex financial system that supplies the money and credit needs of the economy.
The information used for the analysis covered the seven year period between 1990-1997. In order to attain the objectives of this research, the scope of the study was define to embody all relevant aspects of fraud in banking and insurance operation. Information was obtained on the fraud cases perpetrated in each bank and insurance company, the different types of fraud and the frequency of each, the amount of loss to banks and customers, the period of concealment, the incidence of collusion, the cause of fraud and the level of effectiveness of fraud preventive measures. The study also focused on areas relating to the staff strength, bank size of deposit, size of loans and allowances, years of banking experience of fraud stars, the means of fraud prevention and detection and the punishment to be meted out to fraud stars.
Finally, the term “Bank” often used in this study refers to a variety of financial institutions. The type of crimes described in this study occur in banks. Thrifts, insurance companies and other types of financial institution.
1.6 DEFINITION OF TERMS
The definition of terms is an important fact in research report. Since without proper understanding of essential terms, the value of the research may be cost through misunderstanding.
Though most terms used in this study are used in their general usage and so needed no deflation for the purpose of this research the following terms are defined.
- Asset:- Any item – real or fictitious that can be be given a monetary value.
- Internal control:- this is the whole system of control, financial or otherwise established by management in order to secure as far as possible the accuracy and reliability of the records, run the business in an orderly manner and to safe-guard the company’s assets its objectives being the prevention or eagerly detection of fraud or error.
- Bill or lading:- A receipts for goods received for carriage to a stated destination, signed on behalf of the master of a ship.
- Industry:- The principle aims at preventing a person from making a profit out of an undesirable events. It states that an insured should be restored to very state (financial position with respect to the insured property) he was in, just before the loss or damage to the property.
- Subrogation:- This principle ensures that an insured receives not more than indemnity.
- Insurance:- It contract between two parties where by the insurer agrees to indemnity the insuresd upon the happening of a stipulated contingence in consideration of the payment of an agreed amount whether periodical or fixed (the premium)
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ORDER NOW
COMPLETE MATERIAL COST N2,500 Or $10. FRESH PROJECT MATERIAL COST 50,000 NAIRA FOR UNDERGRADUATE, OTHERS 100,000 -200,000 NAIRA.
THE NATURE AND CONSEQUENCES OF JUVENILE DELINQUENCY IN NIGERIA: A STUDY OF ENUGU NORTH LGA, ENUGU STATE
MAKE YOUR PAYMENT INTO ANY OF THE FOLLOWING BANKS:
GTBANK
Account Name : Host Link Global Services Ltd
ACCOUNT NUMBER: 0138924237
Account Name : Host Link Global Services Ltd
ACCOUNT NUMBER: 0138924237
First Bank:
Account Name: Chi E-Concept Int’l
Account Name: 3059320631
Account Name: Chi E-Concept Int’l
Account Name: 3059320631
Foreign Transaction For Dollars Payment :
Bank Name: GTBank
Branch Location: Enugu State,Nigeria.
Account Name: Chi E-Concept Int’l
Account Number: 0117780667.
Swift Code: GTBINGLA
Dollar conversion rate for Naira is 175 per dollar.
ATM CARD: YOU CAN ALSO MAKE PAYMENT USING YOUR ATM CARD OR ONLINE TRANSFER. PLEASE CONTACT YOUR BANK SECURITY FOR GUIDE ON HOW TO TRANSFER MONEY TO OTHER BANKS USING YOUR ATM CARD. ATM CARD OR ONLINE BANK TRANSFER IS FASTER FOR QUICK DELIVERY TO YOUR EMAIL . OUR MARKETER WILL RESPOND TO YOU ANY TIME OF THE DAY. WE SUPPORT CBN CASHLESS SOCIETY.
OR
PAY ONLINE USING YOUR ATM CARD. IT IS SECURED AND RELIABLE.
form>DELIVERY PERIOD FOR BANK PAYMENT IS LESS THAN 24 HOURS
CALL OUR CUSTOMERS CARE OKEKE CHIDI C ON : 08074466939,08063386834.
AFTER PAYMENT SEND YOUR PAYMENT DETAILS TO
08074466939 or 08063386834, YOUR PROJECT TITLE YOU WANT US TO SEND TO YOU, AMOUNT PAID, DEPOSITOR NAME, UR EMAIL ADDRESS,PAYMENT DATE. YOU WILL RECEIVE YOUR MATERIAL IN LESS THAN 2 HOURS ONCE WILL CONFIRM YOUR PAYMENT.
WE HAVE SECURITY IN OUR BUSINESS.
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