Accounting Project Topics

Fraud Prevention and Control in the Bank

Fraud Prevention and Control in the Bank

Fraud Prevention and Control in the Bank

Chapter One


Having successfully indicated the numerous problems obtained on finance fraud in the Nigerian banking system, the main objectives in carrying out this research work will now be stated.

  1. To study critically how fraud in banks could be prevented and controlled.
  2. To evaluate the easiest way the ratio of fraud and other fraud committed could be electronically captured.
  3. Ways to reduce the spread of fraud in our banking system, through effective monitoring control procedures and efficient monitoring of electronic transactions until properly executed.



This research work on chapter two will be an overview on the literature review on the subject matter fraud in Nigeria banking system. This review will help me to be knowledgeable on how fraudulent practices are done in banking system and this will act as foundation upon fraud prevention, detection and control in our banking system.


This research and prosecution of case of bank fraud malpractices are highly technical and banking fraud are not jobs for the police officers whose basic educational background is West Africa certificate or even less.

According to him such activities required expert knowledge of banking and accounting and other related discipline. Today banking malpractices involves use of computer which is different from the manual system of fraud and consequently, to be able to meet the challenge here id need for acquisition of the requisite skill and sophistical that will make the job successful.

Problems of syndication and internationalization in-line with several reports most bank frauds involves syndicates and very often with strong insider connection. Furthermore, a significant proportion of this fraud has some internal connection. These dimensions often identification code of banks are able to intercept or eve-generate their own massage to transfer fraud into accounts at other banks.

According to Ajonale (1990) four major categories of computer fraud can be drawn they include:

  1. Tempering with the input system by programming fraudulent data into  computer data bank
  2. Using computers facilities for illegal purposes
  3. Altering or destroying vital data within the computer system.
  4. Stealing money, property or confidential information through the manipulation of the computer output process.

According to Okzie (1999), P.248 made more specific disclosure when he wrote on forms of computer fraud. Computer fraud may take some more or all of the following forms.

  1. Manipulation of input
  2. Manipulation of computer time/access
  3. Alteration of software package
  4. Alteration of master file standing data
  5. Interception of transcript
  6. Program patching
  7. Simulation and modeling

Against this back drop. It become clear that the feeding into the computer of fictions personal data account etc are more successful accomplished in a computerized system than in manual system crimes committed through the manipulated of the computer cannot be detected easily, as continuous evaluation and other control measures may be lacking. It becomes more dangerous when the management of auditor of the bank is involving in such fraud.

Finally the most recent breakthrough where computers now operate via satellite is a blessing a disguise. The implication of this of this is computers now operate via satellite is a blessing a disguise. The implication of this is that every component foreign resident computer scientist conduce transfer of frauds from any of our banks via the satellite at will unless adequate care is taken. The prospect of this must be quite frightening for developing countries like Nigeria.


To explain the theories and models relevant to the research hypothesis it is also important to highlight a little major origin of bank fraud and its classification. According to the central bank of Nigeria (1998) causes of fraud in banks can be classified into institutional social factors. Institutional factors.




According to Arwokemi (2000) p.53 research methodology is concerned with the plane for collection of data, the structure for classifying the data between or among grouped and the strategy for analyzing and interpretation of data

The method also ensures that answers to specific aim are provided. This chapter is concerned with the step procedure and strategies for gathering information about research problem for respondents of this study. The application of research methodology will be required here in order to analyze the data obtained.


It is note worthy of the fact that, collection of data, its structuring specified means of the data analysis and data interpretation is highly important. This section therefore gives us a vision on the topic theoretical frame work and methodology.



The data presented and used were derived through questionnaire, interview and observation. These were used so as to get the required appropriate and the needed information. Questionnaires which are listed of question designed to gather information from respondents by ticking the already provided options.

A total 60 questionnaire were prepared and distributed to three selected bank by equal proportion of 20 questionnaires each.

The banks namely are first bank plc spring bank plc, intercontinental banks plc all are selected banks returned with all sixty (60) questionnaire were returned with responses analyzed here under




The problem of fraud prevention and control in the banking system is on environment task confronting owner and sure way to end menace way around the most careful planned system.


Each bank has the own mean of preventing and checking financial fraud some of those device a incorporated in the management structure of the bank or sometimes initiate by the management concerned in the cause of this research work it was discovered or revealed that fraud is inherent in all banking operation . The reason is that banks deals on cash valuable which are disinable as to induce a corrupt mind into through which bank can be defrauded but greater parts are penetrated through forgeries and defectives of customers’ lodgment.

Even though some staff involves in fraudulent practices, it was discover that they do this mainly in collaboration with outside. In the same vein, single handedly increase. This time they are not use the assistance of a staff, but operate through a computer scientists or expert who intercepts the flow of transaction without the knowledge of nation banks. It was for this reason that the rate of fraud through fictions transfer institutions has been the most prevailed way through which bank institute some controls however, have been yielding result, but people are of the opinion tat it will entail a lot of time which may cause delay in banks. But in the cause of this research, prompt services have maintained.

On the area of staff involvement in fraudulent practice it was discovered that banks either leaves with the money stolen. This is a development which does help the system. One would have expected as to return the money stolen.

During this research work it has been period that caused lack of sound internal control, proper accounting procedure and inside involvement. Even when it is reported and investigation commence, yet another difficult is the cooperation of member of the staff. Some of them who are in position to give vital information will always decline.

During this study, it was learnt that fear of the outcome of investigation and staff involvement in the reported fraud are some of the reasons a staff would not want to assists an investigator.

Finally, in course of this research work two dispute issue, which formed my first and last hypothesis, were addressed, it has now been established that fraudulent practice in bank can be presented and controlled using sound internal controls, proper accounting procedures and period audit by an external auditor.

Also established the fact that fraud actually has a negative effect on the profitability which decline the profit level, loss of public confidence/trust and eventually loss of customers


Banks have a duty to promote and maintain adequate banking services for the public via the restoration of banking confidence among the population.

The government also has a part to play in the game of fraud control.

Fraud should not be allowed to destroy the very society we are trying to build. It has destroyed the dignity of the banking sector and the confidence between bank and their customers. It is threatening the while economy and it is time appropriate actions were taken by both banks and the government.

The problem of detection and prevention of financial fraud is not only limited to the three bank only and the banking system but the whole facts of our society. A society where there is standard number of behaviour where corruption high and low places to the other of the data and where amazing wealth grading is the burring desire of money. How can we save the bank system?

As already noted there is no full proof against financial fraud in the society at large. We can only attempt to minimize it. This is true because, fraudster will always think ahead of the already existing check and balance. It obvious to the bank then to employ all reasonable and practicable measure to project the depositor and shareholders otherwise fraud can ruin the entire system. Existing laws should be reviewed and restricted to complements the efforts of the banks and other actions we can be sure to have a society with minimal incident of frauds.


Having explored in various ways the detection and prevention problem posed by fraudulent activities in the banking system, the researcher makes the following recommendation in the hope they would be of help to bank managers in minimizing the problems.

It is the duty of the police to prosecute crimes relating to bank fraud. This individual bank should not allow to prosecute the fraudster. This is to give room for an independent investigation without any form of interference by a staff who may twist in fraudulent activities that are going sophisticate the police should be well equipped and trained to match the sophistication of the current wave of fraud.

Another one is the judiciary which has been severally accused of delay justice and most times setting criminals free on more technicalities. Offenders should be well punished and made to reproduce everything that was stolen.

Bank should always stay ahead of cyber fraudster by being up-to date with the development in the world of information technology. They should not rely on any obsolete system and till prey to the net of creek. A good internal control mechanism is designed to divide responsibilities so that one person’s work is checked by another  and then authorized by a higher official managers should come from outside the branch to act and check any unhealthy collusion existing in the branch. The personnel department within who jurisdiction is to recruit should do everything possible to ensure that people of undoubted integrity are employed.

Banks should get ride of non qualified staff the should also be a form of infer bank co-operation understanding.

Dormant account should be closely monitored and any transaction on them should be monitored with the consent of management inspector from the central bank of Nigeria must be allowed to visit and inspect the bank records at least once every year. This is to ensure that the bank are complying with CBN regulation and other statutory provision

Finally adequate discipline must be maintained among staff and professional ethics preached regular basis. Any observed fraudulent practice must be matched with adequate sanction. Each case must be purely treated on its merit.

There should be clear-cut arms length relationship in all transaction and firm of promiscuous relationship shall be condemned as they may be determined to the system. Where two staff enters into marriage with each other one should resign, with these, it is to believe that there should be a way forward for banking system.


It is obvious that this research work has a wide scope, covering issue and areas relation to financial fraud in the banking system, there is still need for further research on the subject matter especially in the areas of

  1. The role of bank staff in combating fraud
  2. Financial fraud in bank and its effect on the universal banking system.
  3. More work on detection and control of fraud.


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