CHAPTER ONE INTRODUCTION 1.1.1 BACKGROUND TO THE STUDY
Fraud has been in existence throughout history and has taken many different dimensions. Bank fraud has grown with advent of the banking industry, and has been facilitated by the technological innovations and the widespread use of the Internet. According to the fraud triangle (Cressey, 2013), for fraud to occur the three factors; pressure, rationalization and opportunity should be present. Bank employees have knowledge of the systems as well as classified and confidential information which together with technological advancement can give them the opportunity to commit frauds. All they need is some pressure and the rationalization and that way they become part of fraud cartels that are fleecing millions of shillings from the banks.
According to a report by consultant firm, Deloitte Nigerian banks were victims of more than half the Sh4.1 billion ($48.3 million) fraud that hit East African banks in 2012 as technology made the crime easier. At least Ksh1.5 billion ($17.64 million) was stolen from Nigerian banks in the past one year, in schemes hatched by technology-savvy bank employees. This can be attributed to failure by both the bank processes and the employees to detect and control fraud. Security experts say the amounts reported reflect only a small portion of the real losses suffered since banks prefer internal disciplinary measures in cases involving thieving employees (Kimani, 2013).This means that banks should be on an alert and should also revise their controls to keep up with fraud and technology.
1.1 INFORMATION COMMUNICATION TECHNOLOGY
Information technology has been around for a long, long time. Basically as long as people have been around, information technology has been around because there were always ways of communicating through technology available at that point in time. ICT has transformed the lives of people as well as organizations .It is no surprise that ICT revolution has proven a powerful source for creative vision by utopian thinkers the world over. The reach ICT around the world has been expanding for decades. The recent past has seen particularly rapid rollout of access to communication facilities like telephones and the Internet, as technology advance has driven down costs (Nyokabi, 2012). Like other countries Nigeria has recognized the potential and enabling element of ICT as a tool for social and economic development.
ICT is increasingly seen as a means of enabling other developmental needs rather than as an end in itself hence some types of financial innovation are driven by improvements in ICT. Woherem, (2010) claimed that only banks that overhaul the whole of their payment and delivery systems and apply ICT to their operations are likely to survive and prosper in the new millennium. He recommends that banks should re-examine their service and delivery systems in order to properly position them within the framework of the dictates of the dynamism of ICT.
Fraud:Fraud is an intentional deception made for personal gain to damage another individual. It is a crime and is also a civil law violation. Many hoaxes are fraudulent, although those not made for personal gain are not technically frauds (Wanemba, 2011). According to The American Heritage Dictionary, (Second College Edition), fraud is defined as “a deception deliberately practiced in order to secure unfair or unlawful gain”. In a nutshell, “Fraud always involves one or more persons who, with intent, act secretly to deprive another of something of value, for their own enrichment”(Davia et al., 2010). Wells, (2015) also stresses deception as the linchpin to fraud. Defrauding people of money is presumably the most common type of fraud, but there have also been many fraudulent discoveries, in art, archaeology, and science.
Bank fraud on the other hand, is the use of fraudulent means to obtain money, assets, or other property owned or held by a financial institution (Glaessner and Mass, 2015). Bank fraud is a crime that has been around for as long as banks have been in operation. Anytime there is a large amount of money floating around, there will be people trying to figure out ways of getting it. Fraud can be committed through many methods, including mail, wire, phone, and the internet (computer crime and internet fraud). The difficulty of checking identity and legitimacy online, the ease with which hackers can divert browsers to dishonest sites and steal credit card details, the international dimensions of the web and the ease with which users can hide their location, all contribute to making internet fraud the fastest growing area of fraud. Estimates are that just twenty percent of frauds are exposed and made public. The remaining frauds are either undetected or discovered and not made public because of reputation risk (Bartlett and Ballantine, 2012). Leuchtner, (2011) identified the common fraud schemes in banks as general ledger fraud, identity theft, account takeover and collusion with external criminals.
Apoorva and Juhi , (2017) defined bank fraud as a deliberate act of omission or commission by any person carried out in the course of banking transactions or in the books of accounts, resulting in wrongful gain to any person for a temporary period or otherwise, with or without any monetary loss to the bank. They concluded that bank frauds are the failure of the banker and mentioned the major elements responsible for the commission of frauds in banks; active involvement of the staff-both supervisor and clerical either independent of external elements or in connivance with outsiders, failure on the part of the bank staff to follow meticulously laid down instructions and guidelines and external elements perpetuating frauds on banks by forgeries or manipulations of cheques, drafts and other instruments. There has been a growing collusion between business, top banks executives, civil servants and politicians in power to defraud the banks, by getting the rules bent, regulations flouted and banking norms thrown to the winds.
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