THE EFFECT OF FRAUD ON
CONSUMERS SATIFACTION IN GUARANTEE TRUST BANK, KANO ROAD BRANCH, KADUNA
TABLE OF CONTENTS
of the Study 1
of the Problem 4
of the Study 9
Significance of the Study 10
of the Study 10
1.7 Limitation of the Study 11
2.0 Introduction 12
of Fraud 12
of Fraud 14
of Fraud 15
of Fraud 16
of Bank Fraud 18
of Fraud on Customers 23
2.7 Effect of Fraud on Banks 24
3.0 Introduction 26
of the Study 26
Collection Instrument 26
of the Study 27
and Sampling Technique 27
of Data Analysis 27
DATA PRESENTATION AND ANALYSIS
4.0 Introduction 28
4.3 Summary of Findings 34
SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1 Summary 36
5.2 Conclusion 37
5.2 Recommendations 39
of the Study
The importance of the banking industry in the Nigerian economy cannot
be overemphasized. Banks have been credited with an enable image of being an
important source of capital for the development of the economy. This
recognition drives largely from an assumed role of most banking institution in
mobilizing various deposits channeling them towards profitable investment
outlets. To the extent of the size, type and level of such investment along
with other complementary factors that contribute to the nation’s economic
development. Banking system therefore has been seen as an agent of economic
growth and perhaps economic development.
However, having known the importance of banking industry to the
economic development, there exist various factors that restrain the effective
functioning of the banking industry the world over. Among these factors is
fraudulent activities that is seen to affect almost every bank world over. An
important characteristic of fraud is the intent of doing wrong. Thus, fraud
could be an intentional distortion of financial statement and misappropriation
which involves the act of criminal deception to obtain unjust or illegal
advance for which the penalty may be severe, but it also has a wide implication
in law relating to. There is general consensus that fraud is caused by three
acronyms called “WOE” i.e. Will, Opportunity and Exit. The will to commit fraud
is the individual, opportunity to execute the fraud and exit which is the
escape from sanction. However bank fraud may be caused by numerous factors –
among which are:
Absence of detailed, manual and poor internal control;
Inadequate training and retaining bad management;
Poor bookkeeping and inadequate job rotation;
The poor e-banking system through internet
One of the prime means of fraud in our banks today is internet fraud.
Some of the frauds are the handwork of outsiders, others are perpetrated by the
and sometimes management of the bank concerned. The most significant percentage
of fraud is done by the fraudsters in collaboration with bank staff. As a
result of this very serious economic crime, some staff in the industry is
either being dismissed or their appointment terminated or prematurely retired.
In the banking industry, fraud is the number one the business world. No
company is immune to fraud. It is in all workers of life in the government. In
insurance, in export trade, the banking everywhere special organization have
been formed to combat it, and international police commission tries to deal
with it at international level but it has not and cannot be eradicated. It is
waxing in strength, it is an expanding industry. However, the researcher was
able to lay hands on some commendable write-ups on the 1998 Nigerian Deposit
Insurance Corporation (NDIC) annual report on fraud and forgery cases in
commercial banks. However, the number of reported fraud cases increased by
about 20 percent from its 17 in 1997 to 564 in 1998 on the other hand the total
amount involved in reported loses in 1998 reduced to N3,129.11 million from
N3,590.31 million in 1997 though the actual 1 expected loss stop at a higher
lecel of N673.5 in relative to N224.54 million in 1997 according to write ups
on fraud by the Central Bank of Nigeria – the common forms of fraud are
organization fraud, confidence schemes (a.k.a 419) and occupation fraud
(management employee, computer, procurement and financial reporting fraud). The
smooth of the underworld who are principally involved in bank fraud are always
ahead of the bank planning, and it is difficult to predict when and how they
would strike. They are people whose Intelligent Quotient (IQ) is much higher
than the average banker. The fraudsters think and act fast because that is the
stock in trade.
of the Problem
Frauds in financial institutions vary widely in nature, character are
method of perpetration in general, it may be classified into two ways: (i)
Perpetration (ii) method used on the basis of perpetrations there are three
broad categories, internal, and mix. Internal perpetration of fraud are related
to those committed by members of staff (insiders). External perpetration are
those committed by non-staff while mixed fraud involved outsiders colluding
with staff (insiders).
The most important and common types of fraud highlighted by bank
Administration Institute (1989) in fraud prevention and detection series are discussed
Fee Fraud (419): This involves agent approaching a bank, a company
or an individual with an offer to access large fund at below market interest
rates often for long term. The purposed source of such funds is not
specifically identified as the only way to have access is through the agent who
must receive a fee or commission “in advance”.
Kiting: Kiting is defined by the US Comptroller of the Currency’s Policy.
Guidelines for National Bank Directors as “method whereby a depositor utilize
the time required for cheque to clear to obtain an authorized loan without
Account – Opening Fraud: This usually starts when
a person might use the account within a short period.
Transfer Fraud: Fraudulent money transfer may result from a request created solely for
the purpose of committing a fraud or the alteration of a genuine funds transfer
request. A genuine request can be altered by changing the beneficiary’s name or
account number or changing the amount of the transfer. These day “yahoo boys:
the name given to scammers in Nigeria that send fake emails to would-be victims
asking them to apply for fake contracts or fake lottery thereby winning
non-existing money from a dead billionnaire’s account in different part of the
world. They connive with fraudulent bankers in the Western Union department to
withdraw their ill-gotten hard currencies or without the knowledge of the bank
as regard to the authenticity of the beneficiary.
Fraud: Transfer of funds from one location to another can be affected through
the talex. The message though often coded can be altered to enable diversion of
the funds to an account not originally intended.
Laundering Fraud: This is a means to conceal the existence, source
or use of illegally obtained money by converting the cash into untraceable
transaction in a bank. The cash is disguised to make the income appear
Fraud: Computer frauds can take the form of corrupting the programmes and even
breaking into the system via a remote sensor by a computer programmer or
specialist diskettes can also be tempered with to gain access to authorized
areas or even give credit to an account for which funds where not originally
Frauds: Loan fraud occurs when credit is extended to non-borrowing customers
or to borrowing customers who had exceeded his credit ceiling. The fraudulent
aspect of this class is that there is intent to conceal it from the head office
(Inspectorate) staff on routine check to deceive them with plausible but
falsified statements, document etc.
Intense financial pressure during the economic crisis have led to an
increase of fraud, according to a survey of fraud experts conducted by the
ACFE. Result of the survey, published in the new ACFE report “occupational
fraud: a study of the impact of an Economic Recession” also found that layoffs
are pervasive and are leading holes in organizations’ internal control systems.
The report, recently detailed in the Wall Street Journal, is based upon the
responses of more than 500 randomly selected Certified Fraud Examiners (CFEs).
CFEs are experts in fraud detection, prevention and deterrence, and must pass a
rigorous exam as well as meet high professional, educational and ethical standards.
More than 55.4 percent of respondents said that the level of fraud has slightly
or significantly increased in the previous in months compared to the level of
fraud they investigated of observed in years prior. Additionally, about half
(49.1 percent) of respondents cited increased financial pressures as the
biggest factor contributing to the increase in fraud, compared to increased
opportunity (27.1 percent) and increased rationalization (23.2 percent).
The Central Bank of Nigeria that the backward development in Nigeria
was attributable to weaknesses in the internal control systems of the banks.
This has clearly pointed out to picture of how fraud has been perpetrated in
the financial strength of Nigeria’s banks. In a shell, the damage which the
menace has done to the banks is innumerable and needs urgent attention.
Therefore, the attempt to put an end to the economic degradation gave rise to
the topic of this research.
the curb fraudulent act in the banking industry is fair and accurate credit
transactions to prevent identity theft, improve resolution of consumers disputes,
improve the accuracy of consumers records, make consumer access to, credit
information and for other purpose and also the provisions to help reduce
identity theft, such as the ability for individuals to place adverts on their
credit histories if identity theft is suspected.
customer patronage and this hinders banks’ ability to make profit.
Fraud will also increase the running cost of the bank when they employ
more Inspectorate staff to detect and prevent fraudulent act.
Customer may lose their money that had been deposited in the bank to
fraudsters, because most of this money is not easily recoverable. It also
brings untold hardship to the customer and their family.
of the Study
The objectives of the study are as follows:
To identify the causes of fraud in banks
To identify the various types of fraud being
perpetrate in banks.
To determine the adverse effect of fraud on banks
and it customer.
are the causes of bank fraud?
ii) How often are the fraud
being perpetrated or committed in banks?
iii) What are the various
kinds of fraud being carried out in banks?
iv) What are the adverse
effect of fraud on banks and its customers?
of the Study
The research work will provide possible to take the menace of fraud
happening in Guarantee Trust Bank. It will further state the effect of this
fraud to customer and the bank.
The research work will also serve as a blueprint to the banking
industry in general in controlling fraud. It will also serve as a valuable
material that will be kept in library for students to use as a reference
of the Study
The study will be based on common to manual and computerized accounting
system of Guarantee Trust Bank.
It will also contain the effect of these on the bank and its customers
and it will also provide way forward to these fraud in the bank. The study
shall be limited to Guarantee Trust Bank, Kano road branch, Kaduna North,
of the Study
Constraints of data
affected the study in how small (amount) the intensive academic
responsibilities further compounded, the combination of the two was hectic and