As Nigerian economy continue to face constant economic recession, despite abundant of both natural and human resources in Nigeria due to adoption of falsehood economic system of capitalism inherent in its economic system. The major world views of economic system is on either capital or socialism which proved to be failures for centuries the only solution to the present economic predicament is Islamic economic system, which is recession proof, as it is purely based on ―Adl‖ which is fairness and justice, social responsibility, transparency, trust worthiness, and sharia compliance.

The aim of this paper is to examine a few sample data on the effect of Islamic corporate governance on the relationship between pressure, opportunity, rationalization, capability and banking fraud in selected banks in Nigeria. Thus, instruments such as content and face validity, reliability and the data normality were also examined based on the on revised version by an expert, a few data were analyzed using the statistical software SPSS version 17. The result reveals that the instruments are reliable and the data for pilot study show evidence of rational normality.

The paper intends to discuss the concepts, framework, structure of fraud, and its two contending theories i.e. Fraud Triangle Theory and Fraud Diamond Theory. The paper also intends to analyse the concept of Islamic corporate governance, its theories and the popular theory of Shariah Enterprise Theory (S.E.T), which if properly implemented and giving a sound attention, the issue of fraud in Islamic banks will be a thing of the past. After the extend literature review this paper proposed model as reexamined by some scholars, to see whether the model is viable in today's multi-faith, and multicultural society of 21th century and the likely challenges it might face.