Fraud Theories and White Collar Crimes: Lessons for the Nigerian Banking Industry

Abstract

Fraud and white-collar crimes have assumed different dimensions, albeit with increased sophistication within the Nigerian banking industry. Hence forgeries, deceit and other unwholesome practices have continued to thrive. Unfortunately, there is no definitive answer as to why people commit fraud. Good knowledge of the symptoms of occurring fraud is essential for us to know so we can learn to prevent it. In line with this thought, it has become necessary to review the existing theories on fraud and to ascertain if there are inherent clues or red flags that can be drawn from them to assist banks in the fight against fraud. That is the main objective of this study. There is no gain in stating that any meaningful attempt at stopping the menace of financial crimes will be a welcome development in the long run as managing fraud instead of preventing it might be so dangerous, it poses an institution’s ongoing concern. Thus, the broad objective of this research is to ascertain means and ways for preventing fraud in the Nigerian banking industry. A vast array of fraud theories were reviewed and reconciled with the pattern of financial crimes in the Nigerian banking industry. The research identified the influence of power, personal gain and self-control, loss aversion and risk acceptance, rationalization, and emotion as the drivers or propensity to commit fraud. We must learn our lessons from a past misdemeanor, as this will lead to a reduction in the re-occurrence of frauds. Thus, the essential lessons learnt from this study include the need for effective corporate governance, beefing up of internal control measures and objectively structured mechanisms to regulate and to supervise the Nigerian banking industry. There is also an urgent need for government’s commitment to wage an all-out war against crime and to create a new healthy culture of integrity and honesty in all aspects of life with zero tolerance for fraud and white-collar crimes even in the Nigerian banking industry. Our society also needs to inculcate the principle of self-control/ restraint in individuals.