CHAPTER ONE

1.1    BACKGROUND TO THE STUDY

The menace of financial fraud has certainly emerged as one of the hindrances to bank performance in Nigeria. Although fraud is a worldwide phenomenon, it is the single most important financial problem in Nigeria. The nation has suffered severe losses financially. Banks in Nigeria may not be talking about fraud they persistently suffer, especially because of the sensitivity and response to such exposure (Abdulraheem, Isiaka & Muhammed, 2012).

Prior to 1952, there was no form of banking Act to regulate the establishment and operations control of banks in Nigeria , during that time many banks were registered some of which never operated and ever since the period, fraud has remained a permanent feature in our banking industry. This resulted in a loss of faith and trust in the commercial banks by Nigerians and consequently, under-development of the banking habit in the country.

However, with the introduction of the first Banking Ordinance in 1952 and the Central Bank of Nigeria (CBN) Act in 1959 and other subsequent Acts and ordinances with their amendments over the years used to regulate and control the activities and operations of commercial banks have rather increased financial fraud in magnitude and the method used to perpetrate them acquires greater sophistication day after day. Now with the introduction of modern procedures and advancement in information technology such as those in communication system, automatic electronic gadgets and computers into banking system coupled with various precautionary measures taken by band agents, fraud have rather taken nuclear dimensions and the size of sums involved increased at a geometric rate.

The phenomenon – Financial fraud May be defined as an intentional act of deception involving financial transactions for the purpose of personal gains.

In the words of Awosanya (1986), Fraud is any deliberate action in whatever form (written, spoken, physical) designed to deprive a legitimate owner of his/her assets, properties or rights.

From the definitions given above, it can be noted that fraud must contain some rudiments such as:

1. There must be deceit or deception directed to the detriment of another
2. False representation has been made knowingly without belief in its truth or recklessly careless whether it is true or false.

Thus every act of unfair dealings whether against the bank by its customers or by third parties against the customers by the bank (including its officers), or indeed against the bank by its officers, etc, really supposed to be included. Fraud takes place in various forms, degree, technique and sophistication. The action usually takes the form of forgery-falsification of documents and authorizing signatures and out-rights theft.

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