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NATURE AND EFFECTS OF BANKING INDUSTRY FRAUDS IN NIGERIA, 1990-2008

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CHAPTER ONE

INTRODUCTION

Banking business has always been associated with some degree of fraud. This is, obviously due to the fact that money and near monies are the stocks-in-trade of Bank. Banks frauds are becoming more worrisome to bankers and the larger society because fraud perpetuation is not only on the increase; it has continued to acquire greater sophistication. Frauds not only weaken the financial strength of a bank, it dents the reputation of the bank defrauded and reduces the confidence level the banking public has on the banking system. Fraud in banks is therefore, a matter of great concern to bankers and it has become a formidable issue for everyone concerned with the growth and development of banks in the country.

Fraud, generally, refers to an act o misrepresentation, which causes another person to suffer damages, usually monetary losses. Fraud is not easily proven in court of law and laws concerning fraud may vary from state to state, but in general several different conditions must be met. One of the must important things to prove is a deliberate misrepresentation of the facts. Many fraud cases involve complicated financial transactions conducted by white collar criminals’, business professional with specialized knowledge and criminal intent. It therefore, suggests unfair dealing and could be against the bank and its customers or by third parties against the customers by the banks officers, or against the bank by its officers etc. In the sense, it could take the form of falsification of entries in accounts of customers with a view to take benefits of the excess proceeds or the shortfalls. It could be through forgery of signature of account holders and unlawful withdrawals of money from their accounts or involving cash theft by bank officials as well as customers. Bank fraud in Nigeria is also perpetrated through forged cheques, cross firing cheques, or kitting which involve using bank funds without proper authority, where a customer usually has two or more accounts at two or more different banks or branches. He draws a cheque on his account and deposits the cheque into his account with bank B. Another kind is telex frauds which occur when test keys are manipulated usually with the collusion of NITEL officials, the messages, after being duly tested are transmitted abroad through a correspondent bank and later cashed by the overseas collaborators. Perpetuators also print bank stationery and carve bank rubberstamps. They also use spurious letters of credit accompanied with spurious bank drafts.

It has therefore become necessary to reconsider the great consequences of banking fraud to Nigerian economy. Availability of financial capital is a prerequisite for rapid development and transformation of any Nation’s economy. Economic development involves growth of output of goods and services, which requires real resources devoted to production of capital goods, and this can be limited by the amount of savings available due to banking frauds.

 

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