Fraud has been the precipitant factor in the distress of banks, and as much as various measures have been taken to minimize the occurrence of fraud, it still rises by the day because fraudsters always device strategic ways of committing fraud. This has become a point of great attention in the banking world. The high occurrence of fraud within the banking industry has become a problem to which solution must be provided in view of the large sums of money involved and its adverse implications on the economy (Fadipe-Joseph and Titiloye, 2012). However, Ojo (2008) say that bank frauds is a serious impediment in the organizational growth of a bank as it leads to bank distress because fraud reduces the deposits of depositors and ultimately lead to the erosion of the capital base of banks. An author Ogubunka (2003) opines that bank fraud as lead to bank distress which has become a common glossary in Nigeria leading many banks to fail in the period of 1994 through 2003. Bank distress is the forerunner of bank failure, whereas a bank in distress could have chances of regaining health, a failed bank loses every chance of life.
There is a common agreement amongst criminologists that fraud is caused by three elements called “woe” (Idolor, 2010) for any fraud to take place there must be a will, an opportunity and exit, he further went ahead to say that a fraud will only come about if the perpetrators have the will to commit the fraud, if there is a way out or escape means from appropriate sanctions or institutions that are against fraud or related abnormal behavior (Akinyomi, 2012)
Recent literature categories fraud by the person conducting it and differentiates between first party and third party fraud. In first party fraud, a legitimate customer betrays the bank, whereas in the third party fraud, the customer becomes a victim of criminals who steal identities use lost
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or stolen cards, counterfeit cards or gain unauthorized access to customer account by other means (Gates and Jacob, 2009, Greene, 2009). However (Orad, 2010) even claims that the internet allows criminals to organize as a network, supporting each other in their attacks. Fraudsters are particularly interested in accessing customer‟s online bank accounts. A common practice to steal access data is “phishing”, where an email from an allegedly credible source is sent to bank customers requesting sensitive information such as their username or password. During recent years, phishing has become a significant threat to online security (Bergholz, 2010). Since credit cards have become a major payment instrument for web based transactions, they have attracted great attention of fraudsters (malphrus, 2009).
Akinyomi (2010) view fraud as the act of depriving a person underhandedly of something, which such a person would or might be entitled to but for the perpetration of fraud in its lexical meaning, fraud is an act of trickery which is intentionally practiced in order to gain illegitimate advantage. Therefore, for any action to constitute a fraud there must be deceitful objective to benefit (on the part of the perpetrator) at the disadvantage of another person or group. Fraud typically requires stealing and manipulation of accounts, frequently accompanied by cover up of the theft. It also involves the translation of the stolen resources or property into own resources or property.
In view of the gravity of fraud in banks, the management of various banks had employed different measures, such as establishment of internal control unit, fraud alerts, security measures etc.., yet fraud has continued in an upward trend, and this has called the effectiveness of these measures into question (Okubena, 1998). Young (2002) says that, ample evidence exists that individual integrity of those running the banks today has never been at a higher level. Never before have we seen attention to the actual steps; procedures and control of monetary
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transactions. Employees‟ as well as firms in all industries and banking activities engage in fraudulent practices all over the world. Furthermore, Adeoti (2011) said that fraud is a global occurrence; it is not peculiar to the banking industry or for that matter, peculiar to only Nigeria.
Ogidefa (2008) reported that the problem of fraud in our banking system may have some attachments which are:
a. Bank malpractices
b. Failure to appoint trusted and honest official as the representative in the clearing house
c. Failure to change representative on regular basis
d. Failure to provide locked boxes or bags for carrying cheques to and from the central banks
e. Inadequate training facilities for clearing staff both in the offices and central bank
f. Negligence in checking clearing cheques from the banks to avoid a case of possible short change of cheque
According to Eseoghene (2010) there are various types of frauds perpetrated in banks which embezzlement is a form of fraud which involves the unlawful collection of monetary items such as cash traveler‟s cheque and foreign currencies. It could also involve the deceitful collection of banks assets such as motor vehicles, computers, stationary, equipment and different types of electronics owned by the bank. While defalcation, involves the embezzlement of money held in trust by bankers on behalf of their customers. Defalcation of customers deposits either by conversion or fraudulent alteration of deposit vouchers by either the bank teller or customer is the common form of bank fraud. Where the bank teller and customer collude to defalcate, such fraud is usually neatly perpetrated and takes longer time to discover. They can only, easily be discovered during reconciliation of customers bank account.
There is a common agreement amongst criminologists that fraud is caused by three elements called “woe” (Idolor, 2010) for any fraud to take place there must be a will, an opportunity and exit, he further went ahead to say that a fraud will only come about if the perpetrators have the will to commit the fraud, if there is a way out or escape means from appropriate sanctions or institutions that are against fraud or related abnormal behavior (Akinyomi, 2012)
Recent literature categories fraud by the person conducting it and differentiates between first party and third party fraud. In first party fraud, a legitimate customer betrays the bank, whereas in the third party fraud, the customer becomes a victim of criminals who steal identities use lost
10
or stolen cards, counterfeit cards or gain unauthorized access to customer account by other means (Gates and Jacob, 2009, Greene, 2009). However (Orad, 2010) even claims that the internet allows criminals to organize as a network, supporting each other in their attacks. Fraudsters are particularly interested in accessing customer‟s online bank accounts. A common practice to steal access data is “phishing”, where an email from an allegedly credible source is sent to bank customers requesting sensitive information such as their username or password. During recent years, phishing has become a significant threat to online security (Bergholz, 2010). Since credit cards have become a major payment instrument for web based transactions, they have attracted great attention of fraudsters (malphrus, 2009).
Akinyomi (2010) view fraud as the act of depriving a person underhandedly of something, which such a person would or might be entitled to but for the perpetration of fraud in its lexical meaning, fraud is an act of trickery which is intentionally practiced in order to gain illegitimate advantage. Therefore, for any action to constitute a fraud there must be deceitful objective to benefit (on the part of the perpetrator) at the disadvantage of another person or group. Fraud typically requires stealing and manipulation of accounts, frequently accompanied by cover up of the theft. It also involves the translation of the stolen resources or property into own resources or property.
In view of the gravity of fraud in banks, the management of various banks had employed different measures, such as establishment of internal control unit, fraud alerts, security measures etc.., yet fraud has continued in an upward trend, and this has called the effectiveness of these measures into question (Okubena, 1998). Young (2002) says that, ample evidence exists that individual integrity of those running the banks today has never been at a higher level. Never before have we seen attention to the actual steps; procedures and control of monetary
11
transactions. Employees‟ as well as firms in all industries and banking activities engage in fraudulent practices all over the world. Furthermore, Adeoti (2011) said that fraud is a global occurrence; it is not peculiar to the banking industry or for that matter, peculiar to only Nigeria.
Ogidefa (2008) reported that the problem of fraud in our banking system may have some attachments which are:
a. Bank malpractices
b. Failure to appoint trusted and honest official as the representative in the clearing house
c. Failure to change representative on regular basis
d. Failure to provide locked boxes or bags for carrying cheques to and from the central banks
e. Inadequate training facilities for clearing staff both in the offices and central bank
f. Negligence in checking clearing cheques from the banks to avoid a case of possible short change of cheque
According to Eseoghene (2010) there are various types of frauds perpetrated in banks which embezzlement is a form of fraud which involves the unlawful collection of monetary items such as cash traveler‟s cheque and foreign currencies. It could also involve the deceitful collection of banks assets such as motor vehicles, computers, stationary, equipment and different types of electronics owned by the bank. While defalcation, involves the embezzlement of money held in trust by bankers on behalf of their customers. Defalcation of customers deposits either by conversion or fraudulent alteration of deposit vouchers by either the bank teller or customer is the common form of bank fraud. Where the bank teller and customer collude to defalcate, such fraud is usually neatly perpetrated and takes longer time to discover. They can only, easily be discovered during reconciliation of customers bank account.
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