Fraud Detection and Prevention in Banks

Fraud Detection and Prevention in Banks

Project / Seminar Material
Reference ID: PS-10615-TM

DEDICATION

This research material titled “Fraud Detection and Prevention in Banks” is dedicated to God for his enabling grace, and to all computer enthusiasts who contributed to make life a pleasant experience during my research documentation.

ACKNOWLEDGEMENT

I extend my sincere gratitude to all those who contributed to the completion of this project. Special thanks to my Supervisor (Name of your Supervisor), the Head of Department (Name of your HOD), the Lecturers in the department of Public Administration (PA), Book Authors and Profound Scholars of existing or related project material on “Fraud Detection and Prevention in Banks” for their invaluable guidance, support, and expertise throughout the journey.

I am also grateful to your study area (mention any funding organizations, if applicable) for their financial assistance. This research would not have been possible without the encouragement and assistance of some stakeholders (mention any mentors, teachers, or colleagues). Additionally, I would like to acknowledge the understanding and patience of my family and friends during this endeavor. Your unwavering support has been a constant source of motivation. Thank you all for being part of this meaningful endeavor.

TABLE OF CONTENTS

PRELIMINARY PAGES

CHAPTER ONE

INTRODUCTION

    CHAPTER TWO

    LITERATURE REVIEW

    • 2.1 Introduction
    • 2.2 Conceptual Review
    • 2.3 Theoretical Framework
    • ⋮
    • 2.4 Empirical Studies

    CHAPTER THREE

    RESEARCH METHODOLOGY

    • 3.1 Introduction
    • 3.2 Research Design
    • 3.3 Population of Study
    • 3.4 Sampling and Sampling Technique
    • 3.5 Validation of Research Instrument
    • 3.6 Method of Data Collection
    • 3.7 Method of Data Analysis
    • 3.8 Questionnaire Administration
    • 3.9 Ethical Consideration
    • 3.10 Statistical Analysis

    CHAPTER FOUR

    DATA ANALYSIS, RESULT AND DISCUSSION

    • 4.1 Introduction
    • 4.2 Presentation and Analysis of Data
    • 4.3 Re-statement of Research Questions
    • 4.4 Test of Hypotheses
    • 4.5 Discussion of Findings

    CHAPTER FIVE

    SUMMARY, CONCLUSION AND RECOMMENDATION

    • 5.1 Introduction
    • 5.2 Summary of Findings
    • 5.3 Conclusion
    • 5.4 Recommendation
    • 5.5 Suggestion for Further Study

    REFERENCES

    APPENDIX A - “QUESTIONNAIRE”

    ABSTRACT

    Fraud in this study is shown as any dishonesty acts intended to deceive and deprive someone of his legitimate possession.

    This study was aimed at finding out how fraud could be detected and prevented in the Nigerian banking industries.

    The major findings in this study include the followings:

    1. Frauds in banks very often
    2. Frauds in banks occur with active connivance of internal bank staff.
    3. Frauds in banks include forgeries of signature of customers, illegal granting of loans and advances and illegal foreign exchange transactions etc.
    4. The major fraud prevention and protection measure adopted by banks were provision of operational manual establishment of inspectorate unit, internal audit units use external auditors, segregation of duties and establishment of good internal checks and control system.
    5. Majority of bank workers believes as follows. The punishments noted to fraudsters are grossly inadequate. The antifraud law in Nigeria is highly inadequate and that those responsible for checking frauds in Nigerian banks were not living up to expectations.

    The major finds in this study includes among others.

    1. The establishment of a good salary structures and condition of services.
    2. A change in our value system that will de-emphasize money.
    3. The law enforcement agents must be move properly educated about procedures, instrument and practices.
    4. Installation of good hiring and training policies and procedures that can go a long way to help reduce the incidence of fraud.
    5. Adequate punishment for fraudsters that could serve as a good deterrent to frauds in banking.

    Fraud Detection and Prevention in Banks

    CHAPTER ONE

    Introduction

    1.1 Background Of Study

    Banking system of any country holds the key for the success or otherwise of the economy of that country. There is no doubt about the axiom that the frauds in such key area of the economy as banks is going to be a matter of concern to bankers, the monetary / political authorities and the generality of a country and population.

    In Nigeria today, frauds in all sectors of the economy and more specifically in banks has acquired sophistication by day. The sizes increase in geometric progression. All people in all sectors of economy and involved, respectable members of churches, mosques, political leaders. It cuts across the generality of the community.

    The resultant effect is more damaging leading to wholesome losses on banks and progressively eroding into the public confidence on these banks.

    Damaging losses upon losses to banks through organize frauds has been reported. For instance, in 1990, the Nigerian deposit insurance company in its report on banks lost a staggering sum of N840 million through fraud and sacked a total of 417 staff because of fraud perpetration.

    It is no gain saying the fact that no fraud will success without the active connivance of the bank staff with customers of doubtful integrity. What is required is a system and action plan that will ensure earthly detection. However, one has to say that prevention is better than cure in medicine. It is better to stop a disease from coming at all. Whatever plans for fraud control in banks must embody fraud prevention technique.

    In this paper we will search for early fraud detection and control in Nigerian banks. We will also recommend at the end of this paper an action plan that will, if well employed, help reduce the incidence of frauds in Nigeria banks.
    First bank of Nigeria Plc is chosen for this study, because it is one of the oldest banks in Nigeria with a work force of over (6,566) and (328) branches through out Nigeria. The head officer of the banks if in Lagos. The bank was founded by Sir Alfred Jones in 1894 at Liverpool. The second branch of the bank in Nigeria was in the old Calabar in 1900.

    1.2 Statement Of Problems

    Nearly all banks in Nigeria including the Apex banks, the Central bank of Nigeria, seem to be under siege by men of under world, on most occasions, with the connivance of bank staff. Banks in Nigeria cost a whipping sum of N840 million in 1992 and a total of 417 staff due to fraud.

    In this syndrome one if likely going to witness more of this frauds and loses in the banks.

    1.3 Objective Of Study

    This study is aimed at achieving the following objective:

    1. Identify the various forms of frauds perpetrated in Nigeria’s financial institution. Seek out more preventive measures for use by Nigeria banks fighting frauds.
    2. Identify methods available for early detection and prevention of frauds in the banking system.
    3. Identify the key actors in fraud detection and prevention in the banking industry.
    4. Identify the role of managers in the detection and prevention of fraud in the banks.

    1.4 Research Questions And Hypothesis

    This present study will answer the following problem questions:

    1. What are the various forms of fraud in Nigeria banks?
    2. How has banks in Nigeria been affected by frauds in its operations?
    3. What is the most effective prevention measures available for Nigerian banks for use in fighting fraud in its operations?
    4. What are the most effective ways of detecting fraud in the Nigeria financial system?
    5. What holds responsibility for detection and prevention of fraud in Nigeria banking system?
    6. What are the role of bank manager in the prevention and detection of frauds in banks?
    7. How does the bank in Nigeria handle cases of frauds in heir banks?

    The hypothesis here is that in most bank frauds in Nigeria, occurs with the active connivance of bank staff. Most banks workers believe that bank frauds occur because those responsible for preventing it fail to live up to expectations.

    1.5 Scope Of Study

    The research study concentrated of finding out the most effective ways of fraud detection and prevention as it affects the banking industry with special emphasis as it obtained in First Bank of Nigeria Plc.

    1.6 Significance Of Study

    This study will be of high signification especially for new banks. This study investigated comprehensively all about frauds in the banking industry. It ranges from detection and preventions. Information gathered from the study, will be documented.

    A document containing information for new banks at least in their attempt to fight corruption, and frauds in their young fitters. Such document will also be useful for the older banks as fraud detection and prevention techniques will be very useful for banks (old and new) at least in the formulation and implementation of fraud control policies.
    Some of this findings and recommendation at the end of the study will be of great use to the banks and open up more area for further research.

    …

    CHAPTER TWO

    2.0 Literature Review

    2.1 Introduction

    This chapter focuses on the review of related literature. A literature review includes the current knowledge as well as theoretical and methodological contributions to a particular topic. It documents the state of the art with respect to the topic you are writing. It surveys the literature in the topic selected. In this research work the literature review includes the …

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