FRAUD IN NIGERIAN BANKS AND ITS IMPACT ON BANKS AND THE NIGERIAN ECONOMY.VOLUME 2

VOLUME TWO

FRAUD DETECTION, PREVENTION AND CONTROL
It should be obvious from the catalogue of causes, nature and types of fraud that have been given that their identification, prevention and control should be a collaborative effort involving government and its agencies; the operators, i.e. financial institutions management and staff; and the general pubic. While the major task here is to articulate the role of government and its agencies in this respect, it should be emphasized that the classic rule of banking. “Know your customer’’ is the key to identifying, preventing and controlling frauds. It is pertinent to submit that the role of government and its agencies is more of curative whereas the financial institutions and members of the public have dual role of preventing and curing frauds.

2.1 ROLE OF GOVERNMENT
The role of government in the prevention and control of frauds in banks and other financial institutions is a Herculean task. It boarded mainly on ensuring a disciplined society, promulgation of appropriate statutes, establishing relevant institutions and ensuring enforcement of various legal provisions.
The anti-corruption act passes by the senate, if well prosecuted and faithfully implemented, would go a long way in preventing and controlling frauds in our society. The activities of the Economic and Financial Crime Commission should be without fear or favor or witch-hunting of political opponents if really we want to eradicate fraud from our society. Convicts should not be allowed to occupy top position in our banks or outright ban should be the best option. This deduction is based on the realization that indiscipline breeds all sorts of vices including fraud. In recognition of this, the government should put in place relevant status to ensure safe and sound practices in the Nigeria financial system.
They CBN Decree, Banks and other Financial Institutions (BOF1) Decree, NDIC Decree, Community Bank Decree, Micro Finance Bank Decree and Insurance Decree should be upgraded to meet the challenges of the day and to further give effect to its resolve to rid financial institutions of frauds. The government constituted the “National Committees on Malpractices in Banks and Other Financial Institutions” in 1990. This committee should be strengthened with better legislations and the much needed funds.

2.2 ROLE OF CENTRAL BANK OF NIGERIAN (CBN) AND NIGERIA DEPOSIT INSURANCE COMMISSION (NDIC)
The subject of frauds in the financial system is of special concern to the monetary and supervisor authorities, particularly the CBN and NDIC. These government agencies are concerned about the safety of individual institution and the soundness of the banking system. Most especially, the NDIC is specifically charged with the responsibility of protecting debtors. The prudential regulations of the CBN/ NDIC to banks are also aimed at preventing and controlling frauds. For example the conditions in the prudential guidelines for licensed banks that all banks should review their credit portfolio quarterly would help early detection of any acts of fraud, forgeries and financial malpractices relating to loans and advances granted under suspicious circumstances.
In effect, examination recommendations emanating from the CBN or NDIC must be treated with seriousness by banks and must receive the backing of the board of directors, shareholders and management of the effected banks.
There is also the statutory requirement for banks and other financial institutions to employ external auditors to check their books and affairs. For banks not to exercise undue influence on external auditors, their appointment and termination is subject to the approval of the CBN.

2.3 ROLE OF BRANCH MANAGEMENT
The branch’s ability to prevent or detect and control fraud depends essentially on the quality of personnel assigned to it by head office and the effectiveness of internal control in place. The usual measures which ensure timely detection and control of fraud may be categorized as:
A. Personnel control: proper recruitment procedures – (screening, referees, sworn declaration, certificates,
Photographs, permanent home address etc).
B. Administrative control: (a) segregation of duties (b) dual custody (c) security personnel (d) security devices e.g. Test key, Regiscope, cameras (e) franking machines.
C. Accounting control: e.g. (a) Data validation, (b) Prompt posting of transaction ,(c) Balancing, (d) reconciliation, (e) Variance analysis, (f) Review and statistics, (g ) Budgeting , standards and protections, (iv) Financial control :e.g. (a) cash limits (b)signing powers (c) specialized stationer (e.g. certified cheques, bankers payment coupons ).

The control of fraud at branch level must focus on means of payments (i.e. bankers payments, inter branch transfers) and accounts (i.e. bank’s ledger, impersonal accounts, customers account)




REFERENCES

Alashi, S.O (1994) “ fraud prevention and control , the Role of Government
and Agents “Nigeria institute of bankers Lagos Vol .30 no 4 pill -15
Bank Administration Institute (1989) “ fraud prevention and Detection
“(first national bank of Chicago)
Drover, C.B and Bosley R .W.B (1975) Sheldon’s practices * law of banking,
Macdonald & Evans 10th Ed.
Eke chi , A.O (1990) ,“ Frauds And Forgeries in banks : causes
types and prevention ,” seminar paper presented a the national seminar
in bank audit organized by ICAN in Lagos

Leslie, R .h. (1974) “auditing “Macdonald & Evans, forth Ed
N.D.L.C. (1992) Annual Report
Nduka.J. (1993) “internal control system: design and Implementation,”
a paper presented at FITC Course Effective Bank Inspection
Sandra, B.A (1994) “understanding of fraud in Banks, financial And Administrative
System,” Being A paper presented AT A workshop Organized by Michael
Stevens and Associates, Lagos.



CONLUSION
In view of the craze for money in Nigeria, misplaced value judgment and the prevailing harsh economic environment, big time frauds are on the increase and banks are losing amounts running into millions of naira to fraudster everyday. The starting point is remorse and the danger for us is denial and the refusal to admit our weaknesses. Our inordinate quest for wealth and material things. Michael J. Comer lamented that many frauds succeed because some people would rather be fooled than be thought to be distrustful .It is important to stress the need for all financial institutions to comply with statutory requirements of rendering returns for effectiveness of all the policy measures which the government , monetary and supervisory authorities might design to curb the menace . The prevention, detection and control of frauds should be a collaborative effort of banks, their customers, the public and the government including relevant agencies. Frauds in the financial system should as much as possible be minimized as it kills the institutions and destroys the economy of our nation. All hands must therefore be on deck to detect prevent and control frauds in our financial system. We are called here to live a life of dedication and consecration. Our old life and nature have got to die and a new one be birthed after reading through this article.