Full Project – Impact of bank verification number (BVN) policy on corrupt business practices

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CHAPTER ONE

INTRODUCTION

1.1     Background to the Study

With the increasing incidents of compromise on the conventional security system (password and pin), there is a high demand for greater security on access to sensitive or personal information in the banking system (Emefiele, 2015).The high rate at which fraudulent activities are going on in Nigeria made the Federal Government (FG) and the Central Bank of Nigeria (CBN) stand on their toes in other to resolve the issue of frauds and to boost financial security in the Nigeria Banking Industry. Because of this, the Central Bank of Nigeria on February14, 2014 made it compulsory that all account holders should have a Bank Verification Number (BVN) to enable the account holder to have a single identity in all the banks in Nigeria. Multiple account holders would be covered with a single registration in any of the banks where they have accounts; all he or she needs to do is to link it with his or her accounts.

The essence of this system is to help the bank in the protection of their customers from theft and other financial/ economic crimes growing in the financial system (Vanguard Newspaper, 2015). The Bank Verification Number (BVN) is a great step taken by the Central Bank of Nigeria (CBN) to strengthen the financial security and order in the banking sector of Nigeria. One of the importance of the BVN is that transactions will be safer once all protocols are duly observed. More also, the essence of this BVN exercise is to ensure that bank transactions are safer and fraudulent transactions are minimized, if not eliminated (Nweze, 2015).

Bamidele (2015) argued that identity management has not thrived in the Nigeria banking sector unlike other countries like Brazil, Australia, United states, Mexico etc., where biometric identification techniques have been adopted because of their effectiveness in identity security. Nevertheless, despite that Nigerian government has implemented numerous statutory regulations to curb corrupt practices in banking sector (ranging from criminal and penal code Act, Companies and Allied Matter Act, 1990; Banks and other Financial Institution Act, 1990; Central Bank of Nigeria Act, 1991; Nigeria Deposit Insurance Corporation Act, 1988; Financial Malpractices in Banks Act, 1994, and other financial security measure),financial malpractice still remains an issue of major concern in Nigerian banking sector. In the report from Nigeria Interbank Systems (NIBSS), it was stated that Nigerian banks lost a total of N159 billion to cybercrime between 2000 and 2013. This represents a loss of roughly N33 million per day or approximately N12 billion per year, which more than average took place from 2010 when the internet became a booming tool for identity fraud (Chima, 2014). Similarly, the annual reports of Nigerian Deposit Insurance Company (NDIC) shows there was 182.77% increase in successful fraud cases in Nigerian commercial banks between 2010 and 2014 (James, 2014). Such increase shows a high incidence of compromise on the traditional security systems like identification cards, passwords and PINs .There is a large and growing body of evidences (Pooe & Labucshague, 2011); Adewale, Ibidumi & Badepo, 2014; Imuetinyan, 2010) which demonstrate that optimization of traditional authentication system or adoption of new, more effective system is crucial for curbing identity theft as well as ensure adequate security of depositors fund in money deposit banks.

Therefore, Biometric Bank Verification Number (BBVN) appears to be an effective authentication system for adequate compliance with the CBN policy on Know Your Customer (KYC); which is enshrined in CBN AML/CFT Manual, 2009.

The objective of this study is to examine the impact of Bank Verification Number (BVN) in combating corrupt business practices in the United Bank for Africa in Lokoja.

1.2   Statement of the  Research Problem

The Nigeria society is bedeviled with so many corrupt practices which have eaten deep into all fabrics in Nigeria as a result of the diversion of funds and money laundering. To address this corruption, the Administration of President Muhammadu Buhari Implemented Treasury Single Account(TSA) in 2015 and BVN in 2014 schemes with the aim of not only combating corruption in Nigeria but also eradicate it. It is therefore uncertain whether the implementation of BVN has helped to prevent corrupt business practices in the United Bank for Africa branches in Lokoja or not despite government effort..

1.3   Objectives of the Study

The main objective of this study is to examine the impact of bank verification number (BVN) policy on corrupt business practice in Kogi State. The specific objectives include:

1. To examine the effectiveness of Bank Verification Number in curbing corrupt business practices in banking sector in Kogi State.
2. To ascertain the extent to which Bank Verification Number serves as an effective tool for safety of depositors’ fund in United Bank for Africa in Kogi State
3. To establish the nature of relationship between Bank Verification Number and operational efficiency in United Bank for Africa in Kogi State

1.4     Hypotheses of the Study

The following hypothesis will be formulated in chapter four.

Hypothesis I

Ho:    Bank Verification Number is not effective in curbing corrupt practices in  banking sector in Kogi State.

Hi:   Bank Verification Number is effective in curbing corrupt practices in  banking sector in Kogi State.

Hypothesis II

Ho:   Bank Verification Number does not serve as an effective tool for     safety of depositors’ fund in United Bank for Africa in Kogi State.

Hi:    Bank Verification Number serve as an effective tool for safety of depositors’ fund in United Bank for Africa in Kogi State.

Hypothesis III

Ho:  There is no significance relationship between BVN and operational efficiency in United Bank for Africa in Kogi State

Hi:     There is significance relationship between BVN and operational efficiency in United Bank for Africa in Kogi State

1.5   Significance of the Study

The study brings about the examination of the decline and low performances, coupled with inefficiency in most Nigeria organization, especially in banking sector. Therefore this study will be of tremendous benefits to the:

Policy Makers: In that, it will enable them to identify the causes, effects of fraud and corruption in banking sector and provide a framework by which they can be minimized in Nigeria banking sector through BVN.

The auditor and the regulatory authorities such as CBN, NDIC and SEC will also learn one or two lessons from this study by discovering the loopholes to corrupt business practices and how BVN can be used to reduce fraud.

Also it will pose a challenge to other researchers who may be interested in carrying out more research in related field. It will also be beneficial to student as a reference material in their libraries and finally, it will contribute to knowledge and complement the existing literature on the subject matter.

1.6 Scope of the Study

This study covers the impact of bank verification number policy on corrupt business practices in Kogi State with particular reference to United Bank for Africa, Lokoja

1.7  Limitations and Constraints  of the Study

This research work is limited and constrained  by the following:

1. Financial Factors: Finance is general constraint that acts against comprehensiveness of a research work, this is a result of the present economic crisis that is biting on everybody in the country, in this case the research has no enough money needed for this study.
2. Time Constraints Conflict: Conflict of time between the researcher and the respondents is another limitation, this is as a result of the fact that the less busy time for the researcher could be a busy time for the respondent due to the work load in the school.

• Institutional Obstacle:Uncompromising attitude of some management staff of the case study to present the researcher with relevant information which according to then is official secret.

1.8   Definition of Key Terms

It is important to give a brief definition of the following key terms in order to know the meaning of the key concept and some words in this research.

Banking System: Banking system can be regarded as the framework or structure of laws regulating the operations and practice of banking and flow of financial resources in an economy.

Banking Sector: Is a driving force of multiple economic activities through the transmission functions by allocating funds from the surplus sector to the deficit sector of the economy.

Biometric: Refers to the identification of an individual based on physiological or behavioural traits such as fingerprints, signature amongst others.

BVN:  Is a biometric identification system that gives each bank customers a unique identity across the Nigerian banking industry.

Corrupt Business Practice: Corrupt Business practices are those set of the method, procedure, process, or rule that are improbity in an organization or economic system whereby goods and services are being exchanged for a reward

Fraud:   Fraud in the context of Nigerian law as the act of depriving a person dishonestly of something which is his or something to which he is or would or might but for the perpetration of deceitful act be entitled.

Money Laundering:  Is the practice of engaging in financial transactions to conceal the identity, source, or destination of illegally gained money.

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Full Project – Impact of bank verification number (BVN) policy on corrupt business practices