Banking and Finance Project Topics

An Investigation Into the Strategies to Minimize Fraud in Nigerian Commercial Banks

An Investigation Into the Strategies to Minimize Fraud in Nigerian Commercial Banks

An Investigation Into the Strategies to Minimize Fraud in Nigerian Commercial Banks

Chapter One

Objectives of the study

At the end of this study the researcher has planned to achieve the following general and specific objectives.

General objective of the study

The general objective of the study is to assess fraud control practices at First Bank.

Specific objectives of the study

The specific objectives of the study were:

  • to identify the existence of Anti-fraud policy and minimizing strategy to protect the bank from fraud;
  • to find out the types of fraud experienced in the First Bank;
  • to assess the effectiveness of the minimizing strategy of the Bank;
  • to evaluate the awareness of employees about fraud and its minimizing strategies.



 Theoretical Literature Review on Fraud

Definition of terms

Fraud: According to NBS (2014), “Fraud means an act or omission by shareholders, directors, employees and customers committed with the intention of gaining dishonest or unlawful advantage for the party committing fraud or for other parties”. According to CIMA (2009) fraud is defined as “using deception to make a personal gain dishonestly for oneself and/or create a loss for another. Any person is capable of committing fraud; defrauding an organization is not an accident but rather a calculated and deliberate act of deception. Fraud does not only involve theft of money but also confidential information and assets.” The Institute of Internal Auditors (IIA’s) IPPF (2009) defines frauds as “an intentional act by one or more individuals among management, those charged with governance, employees or third parties, involving the use of deception to obtain an unjust or illegal advantage”. Aderibigbe and Dada (2007) define fraud as a deliberate deceit planned and executed with the intent to deprive another person of his property or rights directly or indirectly, regardless of whether the perpetrator benefits from his/her actions.

Pollick (2006) regards fraud as a “deliberate misrepresentation, which causes one to suffer damages, usually monetary losses”. Albrecht et al (cited in Allyne and Howard 2005:287) classified fraud into employee embezzlement, management fraud, investment scams, vendor fraud, customer fraud, and miscellaneous fraud. Fraud also involves complicated financial transactions conducted by white collar criminals, business professionals with specialized knowledge and criminal intent (Pollick 2006).

Internal Control: Institute of Internal Audit(IIA, 2021) defined Internal Control as “a process effected by organizational structure, work and authority, flows, people and management information system, designed to help the organization accomplish specific goals or objectives It is a means by which an organization’s resources are directed, monitored and measured.” Internal control has a vital role in decreasing the pace and ways of fraudulent activities and helps the organization to protect its resource such as property, machinery, staff and its brand ad reputations.

Committee of Sponsoring Organizations (COSO, 1992) defines internal control as a process, effected by an entity’s board of directors , management and other personnel, designed to provide reasonable assurance regarding the achievement of organizations objectives in the effectiveness and efficiency of operations, reliability of financial and management reporting, compliance with applicable laws and regulations and protect the organization’s reputation. According to Jack J. (2013)

Internal control is a system that processes functions, activities, subsystems, procedures, and organization of human resources that provide reasonable assurance that the goals and objectives of the organization are achieved and ensure that risk is reduced to an acceptable level based on operating, reporting, compliance, safeguarding. (P.245)

Internal control system is very importance for every organization to attain its objectives. Internal control system allows banks to anticipate potential problems which may cause financial losses and thereby prevent or minimize any future losses. In spite of the sources, most likely all have related point about definition of internal control, thus their points are referred to as the purpose or functions of internal control. Accordingly internal control is intended and operated to safeguard asset, devote to policies and directive, and promoting organizational efficiency to achieve the desired objectives.

Control Objective

COSO defines internal controls as “a process, affected by an entity’s board of directors, management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives” in the following categories

  • Effectiveness and efficiency of operations
  • Reliability of financial reporting
  • Compliance with applicable laws and regulations

According to AICPA (2015) control objectives described:

Control objectives ordinarily address the risks that the controls are intended to mitigate. In the context of internal control, a control objective generally relates to a relevant assertion for a significant account or disclosure and addresses the risk that the controls in a specific area will not provide reasonable assurance that a misstatement or omission in that relevant assertion is prevented, or detected and corrected on a timely basis. (p.1398)

Control objectives are essential statements of aim by the management to make sure that each department develops their plans to accomplish the organization’s strategic plans are carried out effectively and efficiently. These statements of organization aim represent the plan of organization and structure established by management to safeguard assets, efficiency of operational, check the accuracy and reliability of financial data, proper use of resource, and encourage effective implementation of policies.

Key Controls System

Each control objective is met by one or more control techniques. These techniques are the way and means that management controls the operation. Millchamp and Taylor (2008) states the types of internal control techniques for the purposes of controlling: they are the activities which are in the form of policies, procedures and structural to achieve organizational objectives.

The techniques are: well-established organization structure, segregation of duties that help reduce errors by increasing involvement of people in duties, use physical custody and dual control over restrict areas and resources, employees should be supervised to make sure works done in accordance with standards, assign authorizer and approval to authorize transaction made in the organization with in their limit and management control over all day to day activities such as performance review of the organization, review reports and developed manual, policy and procedure that help the organization to achieve its objective.




Research Design

A research design is a mechanism of attaining research objective. It also deals the situation for collection and analysis of data that related significance to the research purpose with economic and standard procedures (Kothari 2004, P.31). Since the objective of the study is to assess fraud controlling practice in First Bank, Lagos Branches the appropriate type of research to achieve this objective is descriptive research. As stated by Kothari (2004) ”he major purpose of descriptive research is description of the state of affairs as it exists at present and concerned with describing the characteristics of a particular individual, or of a group and help to describe and assess a certain issue in detail.” Therefore, this study was conducted by using descriptive research design and used a type of design called qualitative and quantitative approach. The qualitative and quantitative data was gathered through open ended and close ended questionnaires.

Sample and sampling techniques

Sampling is used for variety of reasons some of them are; sample study is usually less expensive than census and produce result in relatively faster speed, sampling remain only option when the population contains substantially many members (Kothari 2004).

According to the bank annual report as of October 2016, the Bank has 220 existing branches and 64 new branches, branch offices where 111 up country branches and 109 branches are located in the major towns of the country. The bank has a total population of 5630 permanent and short term contract employees. There is approximately 2331 employees are employed in Lagos. As the geographic area and the number of employees that can be used for the study is very large, it is impossible for the researcher economically and timely, to cover this population in to this research. Accordingly, to facilitate easier in timely and cost effective way of collection of data, the target population were reduced to 1978 managerial and clerical employees that are working at Lagos branches. For this study purposive sampling was used.



 Survey Result

As stated on the research methodology, 185 questionnaires were distributed to 27 different branches that were selected from First Bank which are found in Lagos. Out of the total 185 questionnaires only 183 were fully filled and returned. The first part of the questionnaire consists of the demographic information of the participants related to personal and professional characteristics. Whereas the second part intended to obtain respondent’s opinion and perception regarding fraud and the controlling practice of the bank. For all questions a positive mean response more than 3 statistically suggests agreement with the statement/question, a positive mean response less than 3 implies disagreement and a mean response close to 3 indicates indifferent. A positive mean response of 4   and greater display that there is effective fraud control practice in the bank if not it need an improvement.

Respondent Profile

This part presents respondent’s information related to their personal and professional characteristics in order to give information regarding the composition of the sample.

The demographic data for gender shows that out of 183 respondents there were 52.5% female and 47.5% male. Though the ratio of the respondents are closely proportional both category of gender were participated in the survey.

Table 4.1.Demographic characteristics of the respondents



This section is the last chapter in this research and contains the conclusion of the research and the researcher forward the recommendation based on the result of the study.

Conclusions and summary of findings

The study aimed to assess fraud controlling practice in First Bank, Lagos Branches by identifying areas of deficiency. To achieve these objectives, a descriptive method is employed by using qualitative and quantitative data. The findings and areas of deficiencies in fraud control are summarized as follows.

  1. The bank has anti-fraud and anti-money laundry policy applied in the operation to prevent fraudulent activities.
  2. There are three major types of fraud experienced in the bank: customer denial on cash withdrawal they have made, identity theft and forged cheque, foreign and local cash The reasons for these frauds are poor ethics and moral standards, lack of online auditing and lack of background check in recruitment process.
  3. The control environment of the internal control system is inadequate with regard to Particularly HR departments do not sufficiently conduct background investigations about new employees and use reference. Top management does not adequately communicate about ethics and integrity throughout the organization.
  4. The bank has risk and compliance department but it did not assess risk, and it did not measure and announce to employees about fraud risk factors that influence the possibility of someone committing a fraud in the bank and the impact of fraud on financial performance and bank reputation not assessed.
  5. Information and communication is the weakest of the internal control system practice in the Necessary information is not adequately communicated to all stakeholders on time and Management did not encourage free and open communication regarding ethics and fraud.
  6. The control activity of the Bank has also deficiencies. In this regard, the bank did not use job rotation and there is lack of segregation of duties and responsibilities among.


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