AN ASSESSMENT OF ATM-RELATED CRIME AND ITS PREVENTION STRATEGY IN AMAC (ABUJA MUNICIPAL AREA COUNCIL)

ABSTRACT

The purpose of the study was to examine the effectiveness of fraud risk management practices in the banking sector of Nigeria. The structured questionnaire was used as the main research instrument. Items in the questionnaire were measured on a five-point ranking scale. Both local and foreign universal banks in Nigeria, were included study. A total of 100 employees, 50 from the local banks, and another 50 from the foreign banks were sampled through purposive and convenient sampling techniques. Descriptive and inferential statistics were used to present and analyze the collected data. From the findings of the study, it was revealed that the level of exposure to both internal and external fraud risk by the universal banks was very low. Largely the banks implemented fraud risk management practices by putting in place strategies in the area of sound risk management environment, policies and procedures, and risk mitigation. The banks were highly effective in the management of fraud risk leading to improvement in the performance of the banks. Having a sound risk management environment, policies and procedures, coupled with an effective risk mitigation strategy, mainly contributed to the overall effectiveness of the universal banks in the management of fraud risk. High cost in the implementation of fraud risk management practices was the main challenge facing the universal banks in fraud risk management. The banks are encouraged to invest more in modern software tools, so as to control the incidence of fraud risks.

 

 

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

Regardless of the vast amount of resources, time and energy, used by universal banks in developing corporate governance policies, implementing internal control systems, risk management strategies and the training of employees in order to adhere to best practices, some dishonest, intelligent people, commonly referred to as fraudsters, still manage to find ways to override systems to gain access to organizational resources and assets (Rahman & Salim, 2010). This results in operational risk in the form of fraud.  Operational risk is therefore the initial type of risk that any institution of any sort takes on. Managing and mitigating the operational risk of an organization is a very significant challenge for managers in top positions. The study examines the effectiveness of fraud risk management practices by both foreign and local universal banks in Nigeria.

 

Fraud in recent times, has evolved from being committed casually to being highly organized and sophisticated (Rahmana & Anwar, 2014). This particular problem is more prevalent in the banking sector where there are more sophisticated compromises as compared to other sectors. It is therefore important for banks to develop comprehensive systems and practices to effectively manage fraud risk (Fadipe-Joseph & Titiloye, 2012). Fraud can be grouped into two main categories. The first category is fraudulent financial reporting, known as management fraud, and the second category is the misappropriation of assets, also a known as employee fraud (Adams, 2015). Both categories of fraud are

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particularly harmful to actual and potential users (Hakami, 2011), and may cause materially misleading financial statements. This study will however, emphasise the activities of fraud leading to the issuance of false financial statements.

 

Additionally, fraud imposes numerous costs to both its financial and non-financial victims (Rahman & Salim, 2010). For the banking financial institutions, they might suffer loss in terms of monetary transactions, reputational risks, and human capital, including the acquaintance to the risks of bankruptcy (Idowu, 2009).

 

Developing effective preventive measures against fraud, identifying the methods through which fraud is or can be committed, establishing effective control measures and putting in place fraud resolution guidelines not only helps the universal banks to prevent the loss of revenue and assets, but also improve the quality of their business procedures and their overall standing in the financial services environment (Rahman & Anwar, 2014).

 

1.2 Statement of the Problem

The extant collected works has revealed the fact that, there is not a single financial organization that is immune to fraud, and that a typical financial institution loses 5-7% of its annual revenues due to fraudulent activities. (Fadipe-Joseph & Titiloye, 2012). According to Dumbrava and Gavriletea (2008), although banking institutions are normally known as one of the most strictly regulated sectors, the commercial banks continue to be definite targets for the activities of fraudsters. The reasons are absolutely obvious; banks are the first choice and the best place to come to, due to their role in capital raising and capital intermediation. The ramifications of the actions of fraudsters are not minute, instead, may cause failure in the banking sector. Even more detrimental, it may represent one of the major causes of bankruptcy in the world, being typified by the Iceland crisis in 2008.

 

Fraud cases in the banking industry in Nigeria increased from 1,002 cases in 2016 to 1,418 cases in 2017, the Bank of Nigeria (BoG) has disclosed. This represents a 41.66% increase and is a major cause for concern. The total worth which was reported for fraud or even attempted fraud amounted to roughly GH¢190.4 million.

 

Till now, there has been no specific study to explore the perception of those working in banks regarding fraud-related misconducts in the banking sector most notably, in Nigeria. Most of the previous studies discussed on bank frauds have been conducted in the Republic of Uganda (Bank of Uganda, 2005), India (Fadipe-Joseph & Titiloye, 2012), Qatar (Rahman & Salim, 2010), Nigeria (Idowu, 2009) and Saudi Arabia (Hakami, 2011) but very little is known from Nigeria’s perspective. The current study therefore intends to fill the above knowledge gap in the extant literature, by specifically examining into detail, the effectiveness of fraud risk management in the banking sector of Nigeria. The researcher has further observed that, the silence among the universal banks in Nigeria on fraudulent activities, makes it extremely difficult for banks to share very important information that will help control the menace in the sector. It is therefore imperative for the universal banks in Nigeria, to develop systems and practices to effectively manage fraud risk. The extent to which the universal banks in Nigeria, have developed such systems and practices to effectively manage fraud risk is the subject of investigation in this study.

 

1.3 Objectives of the Study

1.3.1 Main objective

The general objective of this research is to examine the effectiveness of fraud risk management practices by the universal banks in Nigeria.

 

1.3.2 Specific Objectives

To achieve the purpose of the study, the following specific objectives were set out.

1. To explore the degree or amount of exposure of fraud risks among universal banks in Nigeria.
2. To identify the fraud risk management practices of universal banks in Nigeria.

• To ascertain how effective fraud risk management practices are among the universal banks in Nigeria.

 

 

1.4 Research Questions

The following research questions were formulated in order to achieve the objectives of the study

1. What is the amount of exposure of fraud risks among universal banks in Nigeria? ii. What are the fraud risk management practices of universal banks in Nigeria?

iii. What is the effectiveness of fraud risk management practices among the universal banks in Nigeria?

1.5.5 Analysis of Data

The collected data was analyzed statistically using the Statistical Package for the Social Sciences (SPSS, Version 22), to equally assess the relationship between the study variables. The demographic characteristics of the respondents was also analyzed using tables, and other descriptive statistics such as the frequencies, percentages, means and standard deviations.

 

1.6 Significance of the Study

The study will make the following contributions to academia, practice, and policy. Firstly, the study will add to the extant literature by carrying out an original work which will address the effectiveness of fraud risk management practices by universal banks in Nigeria, thereby serving as a reference material for future researchers. This is critical because the study will be undertaken in a developing economy with a focus on the Nigeriaian banking sector. The study would thus enlighten both academia and future researchers by providing an adequate repertoire of knowledge about the effectiveness of fraud risk management practices by universal banks in Nigeria.

 

Secondly, the study will be significant to the management of universal banks in Nigeria, as well as the regulator (that is, the Bank of Nigeria), in closing the knowledge gap in fraud risk management practices among banks in Nigeria. The discoveries will bring to the fore, the many fraud risks among the universal banks in Nigeria, and the extent to which these banks are open to such fraud risks. The regulator through this study, might be able to fashion out pragmatic measures and policies on the effective management of fraud risk for all universal banks in Nigeria. This will in turn, aid the banks to reduce their level of exposure to fraud risk thereby ensuring operational efficiency and profitability. The findings will further expose the level of efficacy of the banks in managing fraud risks as well as the investor perception of the fraud risks in the Nigeriaian banking sector.  Finally, the findings will highlight the encounters of the universal banks in managing fraud risks for appropriate recommendations to be made as to how to address the challenges.  

1.7 Scope and Limitation of the Study

The scope of the study is limited to selected local and foreign banks in Nigeria. They include the GCB Bank, the Universal Merchant Bank, Zenith Bank, and the United Bank for Africa

(UBA). The study targeted basically the respondents within the Abuja Municipal Area Council of Nigeria, comprising of both management and non-management employees. The target respondents were sampled from the four (4) universal banks within the Abuja Municipal Area Council of Nigeria. The study also concerns the effectiveness of fraud risk management practices of the banks and specifically looks at the degree of contact of the banks to fraud risk, and challenges of the sampled universal banks in managing fraud risk.

 

1.8 Organization of the Study

The study is organised into five main chapters. Chapter One is the introductory chapter which covers sections such as the background of the study, the problem statement, the purpose of the study, and the specific objectives of the study. Chapter Two reviews literature on the study area. The chapter reviews the relevant theoretical and empirical literature on fraud and management of fraud risk as well as the challenges of managing fraud risk. Chapter Three presents the methodology. The chapter outlines the research design, the target population of the study, the sample size, the sampling techniques, the data collection instrument, and the statistical tools used in the data analysis. Chapter Four presents the results and discussions. It presents the data collected from the field and summarize them via tables and graphs. The chapter also discusses the findings of the study  relative to the empirical literature. Chapter Five represents the conclusion and recommendation. The chapter summarizes the major findings of the study; conclusions reached and also make relevant recommendations based on the findings. Suggestions for future studies are included in this chapter.

AN ASSESSMENT OF ATM-RELATED CRIME AND ITS PREVENTION STRATEGY IN AMAC (ABUJA MUNICIPAL AREA COUNCIL). 

 

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