Fraud Detection in the Banking System in Nigeria: Challenges and Prospects

Abstract

Fraud is an epidemic dimension that has eaten deep into the banking sector as well as the entire economics in Nigeria. Its devastating effect manifests itself in the deteriorating balance sheet of banks as well as in economic backwardness. Apparently, measures to detect and eradicate fraud in banking sector have been quite ineffective as the fraudulent practices have been on the increase in recent times. Thus, this study evaluates the various challenges of detecting and combating fraud in the banking sector in Nigeria. The results from the descriptive analysis showed that lack of adequate motivation is not a major cause of fraud in banks, looting of fund by bank managers and directors constitutes the major form of fraud in Nigeria. Furthermore, it is recommended that government should strengthened existing anti-graft agencies and to enhance their financial independence. Those managers and director involved in looting of fund should be persecuted to serve as a deterrent to potential fraudsters. In addition, bank staff should be properly screened to test their morality and integrity before recruitment. Adequate internal control mechanism should be established to serve as check and balances among the bank staff. There is also the need for the anti-graft agencies to be strengthened in order to adequately complement the effort of the Central Bank of Nigeria (CBN) at nibbling the incidence of bank fraud in the bud.Keywords: banking system, fraud, fraud detection, fraud prevention, Nigeria

Impact of Cyber-Security on Fraud Prevention in Nigerian Commercial Banks

“…Results found that moral development and education had a significant effect on fraud detection, while CPE on fraud has no effect on fraud detection. Finally, Badejo et al (2018), assessed the numerous difficulties in identifying and preventing fraud in Nigeria's banking industry. According to the findings of the descriptive research, the main type of fraud in Nigeria is the looting of funds by bank directors and managers rather than a lack of sufficient motivation.…”

“…Its severe effects may be seen in the declining bank income statement and the nation's economic downturn. Badejo, Okuneye, and Taiwo (2018), opined that, since deceptive activities have been increasing recently, it appears that efforts to identify and eliminate fraud in the financial sector have been largely ineffectual. Nugraha and Bayunitri (2020), describes fraud as "intentional activity by one or more individuals among management, staff, or third parties that might result in a financial statement deceit."…”

“…Nugraha and Bayunitri (2020), describes fraud as "intentional activity by one or more individuals among management, staff, or third parties that might result in a financial statement deceit." Manipulation, fabrication, or alteration of supporting documentation; asset misappropriation; fraudulent practices including the concealment or the absence of transaction consequences from records or documents; transaction documentation that is devoid of substance; and accounting standards that are distorted (Badejo et al, 2018). Fraud prevention is the process of identifying suspicious transactions in the banking industry and preventing them from inflicting financial or reputational harm to the clients or other financial institutions (FI).…”

“…Cloud security is a sort of cyber security that focuses on ensuring the security of cloud computing systems (Badejo et al, 2018). This involves safeguarding private data and security across internet infrastructure, applications, and platforms.…”

“…Working parents can keep an eye on their kids at home and assist them with their assignments. With the push of a button, a businessman may keep a check on his employees, office, shop, and other assets (Badejo et al, 2018).…”