Introduction
The problem of automated teller machine (ATM) fraud is global in nature and its consequences on bank patronage should be of concern to the stakeholders in banks. This paper investigates the dimensions of ATM fraud in Nigeria and proffer solutions that will mitigate the ATM fraud in Nigeria banking system. The paper employs both primary and secondary data to investigate the ATM frauds in Nigeria banks. The chi-square statistical technique was used to analyze the data and test the hypothesis raised. The paper concludes that both bank customers and bankers have a strong role to play in stopping the perpetrators of ATM frauds in the banks.
Card jamming, shoulder surfing and stolen ATM cards constitutes 65.2% ATM frauds in Nigeria. This fraud is usually perpetrated by the lower cadre. It involves theft, misappropriation or embezzlement of company’s fund and other assess for their own selfish interest.
Fraud is perhaps the most fatal of all the risk confronting banks. The enormity of bank frauds in Nigeria can be inferred from its value, volume and actual loss. A good numbers of bank frauds never get reported to the appropriate authorities rather they are suppressed because of the personalities involved or because of concern over the negative image effect that the disclosure may cause if information may lose confidence in the banks and this could cause a major setback in the growth of the bank in particular.
Fraud leads to loss of money, which belongs either to the banks or customers. Such losses may be absorbed by the profits for the affected trading and this consequently reduces the amount of profits which would have been available for distribution to shareholders. Losses of fraud which are absorbed to equity capital of the banks impairs that bank financial health and constraints its ability to extend loans and advances for profitable operations. In existence case rampant and large incidents of fraud could lead to a bank failure. Fraud can increase the operating cost of installing the necessary machinery for its prevention, detection, valuable time to safeguarding it assets from fraudulent men distract management. Overall the unproductive diversions of resources always reduce outputs and profits which in turn could retard the growth of the bank.
It automatically leads to loss of confidence in the bank by customers and potential customers of the bank and those seriously discourage banking habits in Nigeria.
There had been several incidents of banks going distressed due to manipulative and fraudulent activities of management and staff of the bank. When this happens innocent depositors lose their hard earned savings coupled with ineffective regulatory policies of the central bank prior to the recapitalization of the Charles Soludo administration .It also lead to a diminishing effect on the asset quality of banks. The problem is more dangerous when compounded by insiders’ loan abuses.
Indeed the first generation banks by NDIC was largely a consequences of fraud perpetrated through insiders loan abuses. If this problem is not adequately handled it could lead to distress and bank failures.
1.1 Background of the Study
Historically, there are records to show that indirectly, banking activities started in Nigeria about 1861 when shipping company Elder Demster Line started objective of making easier transaction with the company’s customers in Nigeria. In 1892 African Banking Corporation (ABC) was established as the first banking institution which was initiated by the chairman of Elder Demster.It open its first branch in Lagos in 1892, by 1975, there were seventeen banks operating. Before 1892, Nigeria was evidently underdeveloped economically, even in 1975 despite the growth in number of banks Nigeria is still developing, it is true, however that the number of bank should not be the only major aspect of development that would relate to economic growth. So many other factors are determined with the various resources endowment, labour supply and of course capital. The problem of distress in the financial sector, including outright bank failure, has been observed in Nigeria as back as 1930 when the first bank failure was reported indeed, between 1930 and 1958 when the central bank of Nigeria (CBN) was establishment over 21 bank failure were recorded. However, the degree of intensity and scope of the distress has never been as serious as has been observed since June 1989 when government directive to withdraw deposits of government and other public sector institution from bank to the CBN exposed the weak financial condition of most financial institution and the severity of problem has progressively here used. T
he distressed condition has been traced to a wide range of causes, some of which are listed on literature review. Eventually, when distress came to into the scene, fears of loosing fund to the banks influenced negatively, the banking habit of the rural dwellers. The banking sector consist the pillar on which the economy of any nation can financial service is one of the main point of which economy revolves. The unique roles of banks can be attributed among other things to the importance of money in scheme of things as it perform a fundamental role in shaping the economic destiny of the country Nigeria. Bank support local economic by mobilizing funds from the surplus sector to deficit sector; by serving the credit needs of the communities and provide a safe for the cash balance of individuals, businesses and government. The institution itself has witness a tremendous growth from a few indigenous banks in the 50’s to one hundred in the 90’s. There had been great diversification in the banking industry as most Merchant Banks now have license to practices universal banking. It is widely recognized that the responsibility of banks are multifarious and sometime conflicting as interest of many parties regarding the activities of banks of variance. Depositors expect maximum liquidity and highest return for their deposit, borrower want deep money and shareholder expect maximum profitability. The government regulatory authorities are interesting in prudency and safe operation so as to systematic stability because the failure of single bank will have more micro and macro impact on the institution in other industries as a result banks should synchronize these conflicting interest and they cannot afford to fail.
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