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1.1: Background of the study

The level of fraud in the present day Nigeria has been on the high side. It has eaten into every aspect of our life and economy to the extent that a three years old child talks about Advance Fee Fraud Scheme (419). The economy has faced several challenges today as a result of the billions of naira that have been lost due to the ugly Monster (fraud). The term “fraud” has been defined in different ways by different authors.    For the purpose of this study, fraud can be viewed from the following scholars and experts. The Oxford Advanced Learner’s Dictionary defined fraud as criminal deception. Fagbemi (1986) defined it as the act of depriving a person dishonestly of something which is his. In its lexical meaning, fraud is an act or course of deception deliberately practiced to gain unlawful or unfair advantage; deception directed to the detriment of another. Financial Institution Training Centre (FITC). Helicon (2000) also defines “fraud in  law as an act of deception resulting in injury to another,”. For an action to  constitute  frauds therefore, there must be a dishonest intention and the action must be intended to benefit the perpetrator to the detriment of another person.  

 Going by the definition, fraud in the Nigerian   economy cannot be   restricted   to       banks alone.  Although, fraud cuts across all sectors of the economy but the size of an enterprises usually determines the volume of fraud perpetrated. The problems such as; inadequate manpower, poor internal control system and internal checks, inadequate incentives and unsuitable legal  framework for dealing with offenders, downturn in economy,   recognition   being   accorded the   wealthy    people   regardless   of   their  source   of  wealth   play  a  major  role  in  the  perpetration   of  frauds. The fear now  is  threat  of which the devilish and unscrupulous act will pose to the stability and survival of individual banks, financial institution the performance of the industry and economy as whole. Fraud results in huge financial losses to financial institutions and their customers, depletion of shareholder funds and capital base as well as loss of confidence in financial institutions. In intermediation, banks mobilize savings from the surplus units of the economy and channel these funds to the deficit unit, particularly private business enterprises, for the purpose of expanding their productive capacity. Fraud however has been defined by many scholars Olufidipe (1994) defined trick deliberately practiced in order to gain some advantage (1991), fraud is described as „any premeditate a person or group of persons with the intention of altering facts in order to obtain undue personal monetary advantage‟. Another scholar Idowu (2 camouflage, or exclusion of the truth for the purpose of dishonesty/stage management to the financial damage of an individual or an organization. Going by the definition of the chambers universal learners dictionary Kirkpatrick (1985) define fraud as any person who pretends to be something that he is not is a fraud, a snare, a deceptive, trick, cheat and a swindler. Having explained what fraud is, it is pertinent to define bank fraud which is the subject matter of this study; however bank fraud is the use of fraudulent means to obtain money, assets, or other property owned or held by a financial institution, or to obtain money from depositors by fraudulently representing to be a bank or financial institution. For an action to constitute fraud there must be a dishonest intention and the action must be intended to benefit the perpetrators to the detriment of another person. Going by the definitions, frauds in Nigeria cannot be restricted to the banks alone. A lot of fraudulent activities are prevalent in Nigerian economy ranging from bloody killings, ritual, kidnapping, robberies, forgery, misappropriation, cheating, and gangsters and looting. Bank fraud ranges from account-opening, money transfer fraud, cheque kiting, telex fraud, money laundering fraud, computer fraud, loans fraud and the likes.

According to Oseni (2006) the incessant frauds in the banking industry are getting to a level at which many stakeholders in the industry are losing their trust and confidence in the industry. Corroborating the view of Oseni, Idolor (2010), stressed that the spate of fraud in Nigerian banking sector has lately become a source of embarrassment to the nation as apparent in the seeming attempts of the law enforcement agencies to successfully track down culprits. Although the incidence of frauds is neither limited to the banking industry nor peculiar to Nigeria economy, however the high rate of fraud within the banking industry, calls for urgent attention with a view to finding solutions. Fraud in its effect reduces organizational assets and increases its liabilities. With regards to banking industry, it may engender crises of confidence among the banking public, impede the going concern status of the bank and ultimately lead to bank failure (Adeyemo, 2012). According to kimani (2011) `A way of making money is to stop losing it. The level of fraud in the present day Nigeria has assumed an epidemic dimension. It has eaten deep into every aspect of our life to the extent that a three years old child talks about 419, the name given to the newly discovered advanced fee fraud that is hunting our nation.

“In July 2004, central bank of Nigeria (CBN) unveiled new banking guidelines designed to consolidate and restructure the industry through mergers and acquisition. Banks and Other Financial Institutions Act (BOFIA) 1991, section 15, was also designed to prevent fraud and to make Nigeria banks more competitive and able to play in the global market.

The Nigeria Deposit Insurance Corporation (NDIC) 2007 annual report and statement of accounts report that cases of attempted frauds and forgeries in insured banks, as at 2007 exceeded what was recorded in the year 2006. For instance, the NDIC report for 2007 disclosed that a total of 1,553 reported cases of attempted frauds and forgeries involving over symbols ₦10 billion compare with 1,193 reported cases of fraud and forgeries involving ₦4,832.17 billion in the year 2006. The foregoing statistics clearly unfolds the extent to which fraud had had eaten deep into the financial strength benefit the perpetrators to the department of another person”.

Today, banks cannot withstand the growing pressure of competition among various banks due to the monster called bank frauds. If this act of fraud is not arrested, it might delete our resources because foreign investors might not find it wise to transact business via our banks.


Since evolution banks have been experiencing fraud, this tends to affects the performance and the profitability of banks and may possibly lead to distress. The larger society expects greater accountability, fairness, transparency and effective intermediation from banks, ensuring that they carry out their responsibilities with sincerity of purpose and unquestionable integrity with respect to their operations as a means towards earning public trust and goodwill. The banking business has become more complex with the development in the field of Information and Communication Technology (ICT) which has changed the nature of bank fraud and fraudulent practices. Berney (2008) observed that customers rely heavily on the web for their banking business which leads to an increase in the number of online transactions. Gates, Jacob and Malphrus (2009) assert that the internet provides fraudsters with more opportunities to attack customers who are not physically present on the web to authenticate transactions. In Nigeria, in spite of the banking regulation and bank examination by the Central Bank of Nigeria (CBN), the supervisory role of the Nigeria Deposit Insurance Corporation (NDIC), and The Chartered Institute of Bankers of Nigeria (CIBN), there is still a growing concern about fraud and other unethical practices in the banking industry. This study thus, examines the extent to which fraud and other unethical practices have affected the Nigerian banking sector both in the past and present.


The general objective of the study is to highlight cause and various forms of bank frauds, its effect and ways of preventing them. The specific objectives which this study is designed to achieve include.

i.             To identify the causes of fraud in banks

ii.           To examine the various types of fraud perpetrated in banking.

iii.          To identify the various ways employed in defrauding banks.

iv.          To recommend measures aimed at preventing, controlling and detecting the incidence of banks fraud.


The following research question guided this study:

1. In what ways does lack of effective internal control system lead to banking fraud?

2. In what ways does lack of enough motivation or incentive causes banking fraud?

3. In what ways do societal values contribute to bank fraud?

4. In what ways do bank frauds contribute to the dwindling economy fortune of our country?


For the purpose of this research work, the following assumptions are made;

Ho:    There is no relationship between effective internal control and bank fraud.

Hi:     There is relationship between effective internal control and bank fraud.

Ho:    There is no relationship between motivation or incentive and bank fraud.

HI: There is relationship between motivation or incentive and bank fraud.

Ho:    Societal values do not of have any effect on bank fraud.

Hi:     societal values do have effect on bank fraud


It is believed that at the completion of the study the findings will be very useful;

 To Banks and Financial Institutions as it will be beneficial to the authorities concern with banking operation, managements, staff customers and prospective investors in the industry so as to identify the various means (theft, embezzlement, forgeries etc.) employed in defrauding banks and to identify the cause of frauds in banks in Nigeria. To government as they will find this work relevant to future policy and decision making with particular to restructuring its agencies for better performance in detaching frauds in Nigeria banks. To the general Public the study will be so useful because the banking industry touches the life of everyone in an economy. Banks all over the world have contributed immensely to the economic growth and development of nations. As such, problems such as fraud which can hinder the smooth operation of the banking industry should be viewed with all seriousness in other not to intercept or destroy the rate of development. Finally, to academia it will also be beneficial to people who will intend to carry out further research in this area, to find this study relevant in their research.


This study centers on fraud in the Nigerian banking industry with a keen interest on four (4) insured banks. The four insured banks covered includes United Bank for Africa Plc, Diamond Bank Plc, First Bank of Nigeria Plc, Zenith Bank Plc, all in Nigeria. In the cause of the study, the researcher encounters some limitations which limited the scope of the study;

Staff Reluctance: In most cases the staff of the banks used in the study often feels reluctant over providing required information required by the researcher.

Researcher’s Commitment: The researcher, being of full time student spent most of her time on other academic activities such as test, class work, assignment, examination etc which takes average focus from this study.

Inadequate Materials: Scarcity of material is also another hindrance. The researcher finds it difficult to long hands in several required material which could contribute immensely to the success of this research work.

This material content is developed to serve as a GUIDE for students to conduct academic research

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