Interesting Information About Banking And Financial Fraud

Financial fraud is a serious social and economic problem in a worldwide and more serious in growing countries. It has been existing for a long and it increases day by day. Fraud distress business or economy through loss of funds available for generating more cash flow, which may lead to loss of customer confidence and time wasted through investigations. Fraud is proliferating in both developed and developing countries and as well varies across places in its magnitude, its sources, the way it manifests itself and in its effects on administrative performance and economic development.

Fraud in the banking industry is a global phenomenon and its growth in developing economy has been dreadful. It is the number one enemy of business growth the world over. The fear now is that the increase rate of fraud in the financial institutions, if not detained might pose certain threats to the stability and the survival of the financial institution and the performance of the industry as a whole and no area of the economy is immune from fraudsters.

Fraud leads to loss of money belonging either to the bank or customers. Such losses may be absorbed by the profits for the affected trading period and this, consequently, reduces the amount of profit which would have been available for distribution to shareholders. Losses from fraud, which are absorbed by the equity capital of the bank, impair the bank’s financial health and constrain its ability to extend loans and advances for profitable operations. In extreme cases, rampant and large incidences of fraud could lead to a bank’s failure. Fraud can increase the operating cost of a bank because of the added cost of installing the necessary machinery for its detection, prevention and protection of assets. Moreover, devoting valuable time to safeguarding its asset from fraudulent men distracts management. This unproductive diversion of resources reduces outputs and low profits which in turn could retard the growth of the bank.

Bank frauds is generally bringing untold hardship on bank owners, staff, customers and family members as most bank failures are always associated with large scale of frauds. Fraud shakes the foundation and credibility of most banks resulting to some of the bank being distressed. Fraud in the banking industry has been believed to have influenced the level of bank performances both at the micro and macro levels of the economy. Banking sector has become one of the most critical sectors and commanding heights of the economy with wide implications on the level and direction of economic growth and transformation and on such sensitive issues as the rate of unemployment and inflation which directly affect the lives of our people. In spite of the fact that banking industry is the most controlled and regulated industry, fraud has continued to rear its outrageous head in the industry. It has eaten deep into every units and department in the banking sector. The level of fraud in the present day has assumed an epidemic dimension. Countries with all its human and natural resources, tethers on the brink of failure because of fraud. Much of what we do is “cutting leaves” instead of dealing with the root problem. Generally, fraud takes it root from human heart. It is an axiom that the heart of man is deceitful above all things and is desperately wicked.