ABSTRACT Cases of frauds and foreign in banks have not only become incessant but have also been on the increase in recent years. Although frauds and foreign in banks are global phenomena, their growth in Nigeria Deposit insurance Corporations (NDIC) annual report for instance, presents a disturbing picture of rising trends of fraud. In banks from N3602 million in 1992 to N3519 million in 1991.Fraud, in bank is clearly unacceptably something’s drastic aught to be done to gently stem the fide in view of its implications for the banking industry and the adverse effect it will have on the econo .The effect of bank fraud in frustrating legitimate business, and in corrupting the financial and  socio political system should not be taken for granted. It is against this backdrop that this study seeks to examine the economic implication of bank fraud in Nigeria. The accidental sampling method was used in the selection of 635 persons out of which 624 representing 98.27% of the sampled persons completely filled and returned the questionnaires administered to them. Data collected were analyzed using the simple percentages method, the first and second hypothesis was tested using the chi-square test and it was found that bank fraud do have significant effect on Nigeria’s economy with f-ratio of 476.163> f-critical of 12.592 at 0.05 level of significance with 6 degree of freedom, thus, the null hypothesis was rejected and the alternative was accepted. The ANOVA test on the second hypothesis confirms that Anti bank fraud policies in Nigeria has not significantly  reduce bank fraudin Nigeria with f-ratio of 2.685 < f-critical of 5.987 at 0.05 level of significance with 1 to 6 degree of freedom, thus, the null hypothesis was accepted. The study recommends more effective coordination of all institutions on the fight against bank fraud by the EFCC, and a full, effective and efficient investigation of corruption reports by the ICPC.                CHAPTER ONE 1.0            INTRODUCTION The level of fraud in the present day Nigeria has assumed on epidemic dimension. It has eaten deep into every aspect of our life to the extent a three years old child talk about 419, the name given to the newly discovered fees fraud that is hunting us as nation. Fraud is defined as deceit deliberately practiced in order to gain some advantage dishonestly. For an action to constitute fraud therefore there must be a intended to   benefit the perpetrator to the detriment of another person. Fraud in the Nigeria economy cannot be restricted to the bank alone. Fraud has been find in all sector of the economy and the size of an enterprises usually determines the volume of frauds perpetrated such problems as inadequate manpower, incentives and unsuitable legal framework for dealing with offenders down turn in the economy. It has been resulted in huge financial losses to financial institutions and their customers, shareholders and capital based as well as loss of confidence in financial institution. The increase of frauds has made people to prefer to keep their money at their homes insteady of keeping them in the bank. The fear is now that if this act is not arrested our economy will be detrimented and set back ward. Bank fraud is the concealment of the source, nature, existence, location and disposition of money and/or property obtained illegally or from criminal activities such as embezzlement, drug trafficking, prostitution, 419, corruption and large scale crime. It is a process by which “dirty” money generated by criminal activities is converted through legitimate business into assets that cannot be easily traced back to their illegal origins. In recent times, bank fraud had gain high recognition as global trend. According to Steel (2006), bank fraud is said to be what it is because it shows how “illegal” and “dirty” monies are put through a cycle of transactions and washed, so it could come out as clean/legal money. This means that the source of this fund (illegal money) is obscured through a succession transfers and deals that those same funds can eventually be made to appear as good money. In the Dictionary of Finance and Banking (2008), this term “money laundering” was refers to as a process where money is acquired illegally either through theft, drug dealing etc, is cleaned so that it will appear to have come from a legitimate source. The failure of banks to adequately fulfill its role arises from the several risks that they are exposed to; many of which are not properly managed. One of such risks which is increasingly becoming a source of worry is, the banking risk associated with fraud. Fraud, which literarily means a conscious and deliberate action by a person or group of persons with the intention of altering the truth or fact for selfish personal gain, is now by far the single most veritable threat to the entire banking industry. It is indeed worrisome that while banks are constantly trying to grapple with the demands of monetary authorities to recapitalize up to the stipulated minimum standards, fraudsters are always at work threatening and decimating their financial base. Also more worrying is the rise in the number of employees who are involved in the act as well as the ease with which many escape detection thus encouraging many others to join in perpetuating fraud (Onibudo, 2007). Statistics on the activities of fraudsters in the industry is both amazing and confounding. Ogwuma (1981) estimated that on the average, banks in Nigeria were at a risk of loosing one million naira every working day due to the incidence of frauds which come in different guise or forms. In recent times, this estimate is low going by the NDIC 2001 report where banks recorded cases of frauds and forgeries totaling N11.244 billion (Kazeem and Ogbu, 2002). Such an amount would have been enough to set up a least eleven micro finance banks in the current period. Forgeries currently constitute the greatest challenge facing the industry. Also the number of insiders (staff) who connive with outsiders to perpetuate the act is alarming. According to an NDIC publication, about 1,914 bank staff of various banks were involved in bank frauds between 1994 and 1996. The report also established that frauds contributed immensely to the failure of most banks in the 1990s, the amount involved representing as much as 32.1% of shareholders funds in 1998 (Udegbunam, 1998). Equally worrisome is the rise in the number of top management staff that have either been indicted or accused of engaging in bank fraud. Against these background, the main purpose of this study is to ascertain the nature and causes of bank frauds; as well as proffer solutions that it is hoped, would help reduce the spate of bank frauds in the country.     1.1 BACKGROUND TO THE STUDY Fraud can be seen as the intentional misrepresentation, concealment, or omission of the truth for the purpose of deception or manipulation to the financial detriment of an individual or an organization (such as a bank) which also includes embezzlement, theft or any attempt to steal or unlawfully obtain, misuse or harm the asset of a bank. (Adeduro,1998 and, Bostley and Drover 1972). Fraud and its management have been the main factor in the distress of banks, and as much as various measures have been taken to minimize the incidence 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 sector as well as every organization in Nigeria. Although this phenomenon is not unique to the banking industry or peculiar to Nigeria alone, the high incidence 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. Fraud in its effects reduces the assets and increases the liability of any company. In the case of rural banks, this may result in the loss of potential customers or crisis of confidence of banking public and in the long run end up in another failed bank situation. It is instructive to know that many banking operatives have different reasons for joining various banks. Many have the intention of working for a short time in the banking industry (get whatever they could and find another job that is less demanding), some are in the industry because of their love for banking and all it stands for, while majority are there to enrich themselves by fraudulent means. Due to the upsurge of great viability in the
banking sector, its dynamic and fast expanding level of activities, banks are faced with different kinds of challenges, among which is trying to prevent various fraudulent intentions of both staff and customers. As it were frauds seem to have increased as new technology is born and more advanced techniques of enhancing business transactions have been developed. Fraudsters are constantly devising new plans, updating old methods and trying out new techniques of bypassing these electronic systems meant to ensure high security of banking operations. The introduction of automated systems that lose handwriting and fingerprint trails have not helped matters either. In view of the staggering sums lost to fraudsters by the Nigerian financial sector, in these recent times and the rate at which fraudsters appear to have shifted their attention and directed their energies to banks, devising all unimaginable tactics to exploit loopholes in the control measures and capitalize on carelessness of the staff and customers, fraud in the industry has prevented many banks from achieving their goals. Some banks were just seen in the physical as body and building whilst in reality they were already liquidated and many were already into distress. Fraud has been identified as a major threat to the growth and development of the Nigeria economy, not only in Nigeria but globally. This study examines bank fraud in the Nigeria economy and how it can be prevented. 1.2 STATEMENT OF THE PROBLEM The problem of this research work resolve around finding out the continuous causes of fraud in all banks and other financial institution why banks been able to find solution to curtail fraud.  Furthermore finding the economic effect of fraud to the total economy and consequences of fraud to our international relationship on global market economy. The effect of bank fraud on economic development are difficult to enumerate but it is clear that such activity damages the financial sector institution that are critical to economic growth reduces productivity in economy’s real sector by diverting resources and encouraging crime and corruption, which slow economic growth and distort external economic sector. (Idowu and Obasan, 2012) Bank fraud in Nigeria had worsened in recent times, covering the image of decent and hardworking people in the country. The larger society expects greater accountability, fairness, transparency and effective intermediation from banks. Ensuring that they carry out their responsibilities with sincerity of purpose and devoid of fraud is an important ingredient for gaining public trust and goodwill. The extent to which fraud is prevalent in the banking sector, the nature and causes of bank frauds and proffering possible solutions to the problem is in essence what this research work is all about.  1.3 OBJECTIVE OF THE STUDY  The primary aim of this research work is to ascertain the nature and causes of bank frauds in Nigeria and to find a practical means of minimizing the incidences of
fraud in banks. Thus, the study aims at the following objectives:        I.            Ways of minimizing or eliminating bank fraud in Nigeria.     II.            Determine the level of involvement of banks staff in fraudulent activities;  III.            The extent of bank fraud in Nigeria IV.            Determine the competence of bank staff in early fraud detection and control;    V.            Ascertain the consequences of fraud on banking operations.  VI.            Identify various means employed in defrauding banks VII.            The causes of bank fraud in Nigeria VIII.