Strategies Applied by Commercial Banks in Kenya to Combat Fraud

Abstract

Fraud has become a rampant crime in commercial banks which unless controlled, will continue exposing the financial institutions to massive losses both in terms of financial costs and loss of customers' confidence leading into loss of business. The banks are also facing several challenges with regard to fraud, some of them being development in technology, weak internal controls, lack of investing in employee training, among others. There is therefore need for commercial banks to respond appropriately to these challenges and also prevent fraud.

The objectives of this study were to establish the challenges of fraud faced by commercial banks in Kenya, and to identify the strategies that commercial banks in Kenya use to combat fraud. The research design used was a survey with a population of 44 licensed banks targeted. Primary data was collected by use of questionnaires containing both closed and open ended questions. The target respondents were risk and compliance officers/managers. Secondary data was obtained from Kenya anti-banking fraud unit, which is a unit under the Central bank of Kenya, charged with the responsibility of handling fraud and money laundering cases reported in commercial banks. The data collected was analyzed by use of tables, mean scores, percentages and standard deviation.

In conclusion, it's necessary for a bank to have an anti fraud unit that employs various strategies to curb fraud. Key among the strategies is advancement in technology, banks should invest in advancing their technology in order to prevent fraud. The KYC (Know Your Customer) strategies are also equally important, and if applied together with regular auditing, will be able to curb cases of fraud. The internal controls within the banks should also be looked at keenly to ensure that they are in line with fraud prevention. Limitation encountered during the study was the limited time, otherwise other methods like the interview would have been used to extract more data. The study has focused on the banks perspective and therefore there is need to do more research and look into other stakeholders perspective such as customers and suppliers.