Fraud and Fraudulent Practices in Nigeria Banking Industry

Topics: Bank, Fraud, Fraudulent conveyance Pages: 21 (6002 words) Published: August 28, 2013
An International Multi-Disciplinary Journal, Ethiopia Vol. 4 (3b) July, 2010 ISSN 1994-9057 (Print) ISSN 2070-0083 (Online)

Fraud and Fraudulent Practices in Nigeria Banking Industry (Pp. 240-256)

Owolabi, S. A. - Accounting Department, Babcock University, Nigeria E-mail:

Abstract The paper reviews the various forms of fraudulent practice their impact and inducement for various reforms in banking industry. It also mentions various legislations targeted at reducing fraud and introducing some forms of control and reporting systems. Various theories of fraud are examined and detailed analysis of various causes, prevention and control strategies were emphasized. Previous experiences of different types of fraud and employees involvement are analyzed using tables and percentages for elusive description and discussion. The paper is concluded by with the recommendations targeting at reducing fraud and forgeries in the Nigerian banking industry. Key Words: Fraud, Bank Failure, Forgeries and Embezzlement Introduction Banks and non-bank financial institutions jointly constituting the financial industry of any economy however, the banking system comprises the major corner stone of an economy. For any economy to develop and grow, the financial sector must be strong, solid, effective and efficient. The existence of an effective banking industry is a panacea to growing any economy. The pivot of any economic development is the financial sector through its role in intermediating funds from the surplus units to deficit units. This also stimulates investment, economic growth and employment as well as international trade and payment. The significant roles played by financial Copyright © IAARR, Indexed African Journals Online:


African Research Review Vol. 4(3b) July, 2010. Pp. 240-256

institutions are responsible for the importance accorded them by every economy of the world. Over the years the Nigerian banking industry has witnessed several reforms in search of an efficient and effective financial system. Bank failures are as old as banking industry itself. Despite the significant roles it plays in economic development, its failures are becoming well pronounced. The Dictionary of Economics and Commerce confirmed that 200 banks failed in England between 1815 and 1850 just a period of 35years, one of the reasons attributed to this failure is Fraud. The problem of fraud in banking industry is not limited to any economy, nation, continent or an environment; it is a general phenomenon. The origin of bank failure in Nigeria can be traced to the 1930s bank failure and crises. Nwankwo (1994) wrote that “the crises of confidence in Nigerian banking industry is not a new one, it has been with us for quite a long time. It occurred in the1930s when all indigenous banks, except one (National Bank), collapsed. It occurred again during the banking ‘boom and crash’ of the late 1940s when all but four indigenous banks escaped the liquidators hammer”. Also between 1952 and 1954, 16 out of 21 indigenous banks failed. In the late 1990s, 26 failed banks were liquidated at once while others went through various surgical operations ranging from, restructuring, renaming, acquiring and complete sales to new investors. One thing that is constant in all the reforms was that fraud was a prominent factor in major failures. Several legislations were put in place to reduce, alleviate and if possible eliminate the occurrence and incidences of fraud in the industry most popular and prominent among them are: Companies and Allied Matters Decree No 19, 1990. (CAMD 1990). Banks Employees, etc (Declaration of Asset) Act 1990 National Drug Law Enforcement Agency Act 1990. Special Tribunal (Miscellaneous Offences) Act 1990. The Central Bank of Nigeria (CBN) Decree No 24 of 1995. Nigeria Deposit Insurance Corporation Decree No 22 of 1998. The Banks and other Financial Institutions Decree (BOFID) – 1999. Economic...
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