CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
The financial industry is one of the most important financial foundation in Nigeria, and a central nervous system to the economy with unique emphasis on its roles and challenges, Dennis, (2013). The Nigerian financial sub-part is a backbone of the nation’s economy as it is involved in the administration and marshaling of financial resources to various sector of the economy which allow the economy to grow and expand. The banking subsector, at times venture into project financing in the real sector of the Nigerian economy, this therefore, support the process of economic growth and development of nation CBN, (2009). Any tension therefore in this sub sector will cause serious distortion in the nation’s economy.
This was experienced in the late 2007 till the end of year 2010 when the nation had a bitter experience of financial turmoil due to the financial recklessness of Banks’ top management CBN, (2010). Prior to this period of financial turmoil in the banking sub-sector in the country, Nigerian bank is notable among other things for high online banking fraud cases and in a bid to ensure an efficient and effective performance, banks get the best hands to handle daily transactions and activities. Huge amount are expended to carry out their recruitment exercise, and most often this may be outsourced to other human resources consulting firms, also when the recruitment and selection exercise had been done, they also commit fortunes towards training and retraining of staff member all of which is to improve the technicality and dexterity of each employee so that he/she could contribute immensely towards achieving the corporate goal of the bank. This has also enhanced the employment rate of the country and the contribution of the banking sector to marketing capitalization was also immense and remarkable CBN, (2009).
The financial crisis that rocked this sector few years back led to depletion of the solvency and capital base of some banks, evaporation of customers’ confidence, decline in asset prices and reduction in the banks’ assets which in turn eroded the equity base of these banks and also ignited the a new liquidity crisis and so on CBN, (2009). All banking crisis are different even if they share a common features, but the generally follow a period of significant credit expansion and a sharp rise in stock market in a largely self- sustained mechanism CBN Publication (2010). Notable among the causes that led to banking crisis in Nigeria are fraud, misappropriation of assets and insiders’ abuse among other reasons which during this period made banks to be characterized by macroeconomic instability, slow growth in real economic activities, corruption and risk of fraud CBN Publication (2009).
1.2 STATEMENT OF THE PROBLEM
The banking industry in Nigeria has become more complex with the advancement in the field of Information and Communication Technology (ICT) which has changed the nature of bank fraud and fraudulent practices. Berney (2008) reports that bank customers rely on a daily base on the web for their bank related activities which leads to an increase in the number of online transactions. Gates and Jacob (2009) and Malphrus (2009) assert that the internet provides online fraudsters with more options and opportunities to attack bank customers who are not physically present on the web to authenticate transactions or have left their digital data without prior knowledge. For the last 6 years, the FBI received 207,051 Suspicious Activity Reports (SARs) for criminal activities related to cheque fraud, online romance scam, cheque kiting, counterfeit cheques, and counterfeit negotiable instruments. These fraudulent activities accounted for 47 percent of the 436,655 SARs filed by U.S. financial institutions and equaled approximately $7 billion in expected losses (U.S. Department of Justice [DOJ], 2002). According to Greene (2009), the true economic costs are about 150 percent of the actual fraud loss. 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 an ever growing concern about online fraud and other unethical internet practices in the banking industry. With the fraudulence in banks has become an ever existing problem, there is need to examines the extent to which fraud and other unethical practices have impacted on the banking industry in particular and the national economy generally.
1.3 AIMS AND OBJECTIVE OF THE STUDY
The general aim of the study is to analyze the consequences of bank fraud on the economic growth of Nigeria. With the following objectives of the study include the following:
I. To recognize and identify the classifications of online banking frauds and other related activities in Nigerian financial institution and it impact on the development of Nigeria.
II. To identify the effective control strategies and security measures for managing banks fraud and forgeries in Nigerian banking sector.
- To understand the various management geared towards eliminating or controlling financial crime.
1.4 RESEARCH QUESTIONS
The research questions that this study aim at finding answers are as follows:
- What are the different categories of online banking frauds being perpetrated in the Nigerian banking sector?
- Are there compelling preventive actions and control measures for online bank forgeries and frauds?
- What are the various management and government devices geared towards eliminating or controlling financial crime?
- What are the major type of bank fraud and malpractice in Nigerian Economic development in 21st century?
1.5 STATEMENT OF HYPOTHESIS
The hypotheses of this research are as follows:
H0: Bank frauds have positive and significance consequences on the growth of the Nigerian economy.
H1: Bank frauds do not have positive and significance consequences on the growth of the Nigerian economic growth.
1.6 SIGNIFICANCE OF THE STUDY
The study is significant in many ways as it will provide the banking institution in Nigeria managers with a more effective ways of avoiding or limiting forgeries and frauds in the banking industry. And it will also raise the level of confidence which the public has on these banks. The study will draw the government attention to the finance industry and provide a steady policy against online fraudsters for sustainable improvement of our national economy and also in strengthening and to consolidate the Nigerian economy. The study will serve as a reference material to government, individual, students and other researchers.
1.7 DEFINITION OF TERMS
- Fraud: Fraud is an act of or course of deception deliberately practiced to gain unlawful or unfair advantage deception directed to the detriment of another
- Financial Services Sectors: This involves all financial institutions such as banks, insurance company etc.
- Bank: Is an establishment saddled with keeping money and valuable safely, the money being paid out of the customer order
- Fraud Management: It is the prevention, detection and control of fraud.
- Accountability: Is the rendering of stewardship performance by officials of government to the public.
- Probity: The behavior of being honest in the performance of your job or any other obligation.
