Fraud Management Research Articles

Effect of the Capability Component of Fraud Theory on Fraud Risk Management in Nigerian Banks

The incidence of bank fraud is a fundamental problem with diverse consequences to banks and their stakeholders. Therefore, this study examined the effect of the capability component of fraud theory on fraud risk management in Nigerian banks. The specific objectives of the study are to: examine the effect of malicious insider abuses on fraud risk management efficiency of Nigerian banking sector; evaluate the effect of internal control bypasses on fraud risk management efficiency of Nigerian banking sector; investigate the effect of information security breaches on fraud risk management efficiency of Nigerian banking sector, and ascertain the effect of fraud risk governance on fraud risk management efficiency of Nigerian banking sector. The study adopted ex-post factoresearch design. Secondary data were gathered from the quarterly report on fraud and forgeries of the Financial Institutions Training Centre (FITC) from the first quarter of 2011 to the second quarter of 2020 given a total of thirty-eight (38) observations. The dependent variable of the study was fraud risk management efficiency (FRMη) while the independent variables were malicious insider abuses (MIA), Internal Control Bypasses (ICB), Information Security Breaches (ISB), and fraud risk governance (FRG). Four hypotheses were formulated and tested using robust linear regression analysis. The study employed Stata 14.2 and SPSS 22 in data analyses. We also conducted Skewness/Kurtosis and Shapiro-Francia W’ normality tests, Variance Inflation Factor (VIF) of multicollinearity, Breusch-Pagan/Cook Weisberg test of heteroskedasticity, and Durbin-Watson test for autocorrelation. The results revealed statistically significant negative effects of internal control bypasses and information security breaches on fraud risk management efficiency. The study also found an insignificant positive effect of malicious insider threats and fraud risk governance on fraud risk management efficiency. The implication of these findings is that the Nigerian banking sector is confronted with both internal and external fraud capability challenges which require management attention and stakeholders’ education and awareness. Based on these findings, the study offers comprehensive fraud vulnerability suggestions integrating all banking stakeholders (internal and external) to improve fraud risk management efficiency in Nigerian banking sector.

The Fraud theories: Triangle, Diamond, Pentagon

Early indications of fraud play an important role in detection and prevention. Murphy and Dacin (2011) state frauds mostly occur in three ways: error - lacking awareness, intuition supporting fraud - avoiding negative emotions or effects, and, awareness of fraud coupled with cost-benefit analysis. Hutchison (2013) comparing management fraud to human behaviour says fraud is intentional, multidimensional, and complex - the fallout of several interactive factors, analysis fraud through different abstracts - organisational systems, conflicts of interest, rational choice, social constructiveness, psychodynamic and developmental outlook. The proposed unrealistic goals rewarding attractive compensations purport indulgence in fraud. The desire for achievements, fear of losing the job, challenges meeting financial targets for bonuses, unhealthy competition and criminal collaborations are causes of financial fraud. Management fraud results from decision-making, influenced by personality traits, beliefs, attitudes, social customs, institutional rules and regulations, ethical values, and organisational culture. The paper aims to understand fraud and the theories related to fraud.

Government Integrated Financial Management Information System and Fraud Prevention in Nigeria

The government's integrated financial management information system is essential to improve fraud prevention in Nigeria. One of the most challenging obstacles confronting government sector has always been fraud prevention. According to studies, the integrated financial management information system has aided government budget planning, execution, and monitoring, as well as tracking, recording, and reporting revenues and expenditures in government offices and parastatals in other developing economies, in order to close any gaps and reduce the risk of fraud. The study examined the effect of government integrated management information system on fraud prevention in Nigerian. Survey design was adopted. One hundred and Thirty-Seven (137) copies of questionnaires were administered to government employees in the selected agencies and one hundred and thirty-three (133) were returned. Descriptive and inferential (Multiple regression) were used to analyse the data. The result of the finding shows that integrated financial management information has significant effect on fraud prevention in Nigerian public sector. Adj. R²= 0.64, F- statistics 35.862, P- value <0.000. The study concluded that integrated financial management information system has significant effect on fraud management. The study recommended that the federal government should maintain the integrated financial management system so that when power changes, they will continue to use the system that is already in place to avoid stagnating economic growth and development.

Systems of protection against violations а guarantee of the financial stability of operators

An analysis of the types of traffic-related frauds on telecommunication networks was carried out. Violations on telecommunication networks are the actions of subscribers, telecommunications operators or third parties who are directed to receive telecommunication services at a lower rate or without payment. CFCA experts count about 200 types of violations on telecommunication networks. The most common violations on the part of operators are the unauthorized termination of incoming long-distance and international traffic to the public network under the guise of a local one, without appropriate contracts. Abuses lead to significant loss of income. The most common among subscribers are third-party connection to the subscriber line in order to receive free telematics services of the "900" service, making long-term international calls, and organizing unauthorized meeting points. On the part of third parties, it is a violation to use hardware and software to receive international traffic from the Internet and complete it on a public telecommunications network under the guise of a local one, which leads to interference in the operation of communication means, substitution of call information. The fight against misuse of telecommunication networks relies to a large extent on the analysis of data about services and data contained in settlement systems with subscribers and operators. Detection of suspicious actions of subscribers and their analysis is the main operating principle of modern Fraud Management System (FMS) protection systems. The key criteria for the effectiveness of FMS are the speed of work, the flexibility of setting up algorithms that ensure the detection and analysis of incidents, and the availability of standardized interfaces for integration with billing platforms. Practical recommendations for creating protection systems against Fraud Management System (FMS) violations are provided.

Research on automobile insurance fraud identification based on fuzzy association rules

With the development of automobile insurance industry, how to identify automobile insurance fraud from massive data becomes particularly important. The purpose of this paper is to improve automobile insurance fraud management and explore the application of data mining technology in automobile insurance fraud identification. To this aim, an Apriori algorithm based on simulated annealing genetic fuzzy C-means (SAGFCM-Apriori) have been proposed. The SAGFCM-Apriori algorithm combines fuzzy theory with association rule mining, expanding the application scope of the Apriori algorithm. Considering that the clustering center of the traditional fuzzy C-means (FCM) algorithm is easy to fall into local optimal, the simulated annealing genetic (SAG) algorithm is used to optimize it. The SAG algorithm optimized FCM (SAGFCM) is used to generate fuzzy membership degrees and introduces fuzzy data into the Apriori algorithm. The Apriori algorithm is improved by reducing the rule mining time when acquiring rules. The results of empirical studies on several data sets demonstrate that the optimization of FCM by SAG can effectively avoid the local optimal problem, improve the accuracy of clustering, and enable SAGFCM-Apriori to obtain better fuzzy data during data preprocessing. Moreover, the proposed algorithm can reduce the mining time of association rules and improve mining efficiency. Finally, the SAGFCM-Apriori algorithm is applied to the scene of automobile insurance fraud identification, and the automobile insurance fraud data is mined to obtain fuzzy association rules that can identify fraud claims.

Management and reduction of fraud by analysis of the insurer’s internal and external vulnerabilities and contributions

"Fraud is a dynamic phenomenon: when the industry discovers a „scam” – a specific pattern of fraud – and sets up barriers to prevent it from recurring, another scam takes place – a new pattern is developed by fraudsters. The motivations for committing fraud vary: from opportunists who submit a fraudulent request as a way to recover their insurance premium, probably encouraged by a change in public attitudes towards crime without victims to criminal networks that use fraud as a regular source of revenue generation. The legal, organizational and commercial constraints under which the insurance industry operates often have a negative impact on existing fraud prevention, detection and investigation practices. Initially, the fight against insurance fraud focused on identifying the characteristics of fraudulent claims and fraudulent claimants – the empirical phase / traditional approach and the role that insurance company employees played in this phase was a major one. Then, given the wave of interest in the insurance industry, emphasis was placed on the use of approaches such as: a) cognitive interviewing and vocal stress analysis that were used in forensic investigation, as well; b) data extraction techniques, specially developed for fraud detection. Are just these effective? The material will try to analyze the vulnerabilities and contributions, both internal and external, that are introduced by the policies, procedures and controls implemented by the insurer within the organization."

Bank’s battle against insider frauds ignitors and mitigators: an emerging nation experience

Purpose Banks are exposed to many challenges to name a few i.e. growing market competition, political environment, market forces of demand and supply, technological changes, frauds and poor management. The banking sector devasted experiences of fraud have impacted all facets of the Banking, Financial Services and Insurance. In continuation, this study aims to revolve around themes of different types of frauds, especially insider frauds that have gained mainstream attention in recent major value fraud events with prominent Indian banks. This study will identify the types and drivers of insider frauds. Design/methodology/approach The methodology opted for the study is through confidential primary survey and focused group discussion with risk officers of banks who are associated with Indian banks for more than three years, further to understand the relation between type of Insider frauds and originating drivers were paired based on the principal component analysis. Findings Finally, the paper concludes with the conceptual mitigation framework for different types of insider fraud and driver pairs within the scope of this paper. This paper thought will support policymakers of the Indian banking system to create a more robust environment within the banking system via timely detection of frauds so that up to an extent it can be squared before it appears. Originality/value The study is innovative in the area of banks’ internal fraud management, where original data collected through a primary survey contributes to the conclusion of fraud management for various Indian banks.

PREVENTION OF BRIBERY IN THE PRIVATE SECTOR IN INDONESIA ACCORDING TO THE UNITED NATIONS CONVENTION AGAINST CORRUPTION

Acts of corruption in the private sector regulated within UNCAC include illicit enrichment, embezzlement of wealth in the private sector, bribery in the private sector, and trade in influence. The focus of the problem in this study is how to prevent and eradicate bribery in the private sector as a crime of corruption in Indonesia according to the United Nations Convention Against Corruption (UNCAC). Based on the results of the study it is understood bribery as part of the fraud is a crime that often occurs in organizations both government and private parties in certain activities. Fraud in the form of bribes is caused by several elements, among others; Pressure pressure is an encouragement to commit fraud (Fraud) on employees (employee Fraud) and by managers (management Fraud) and encouragement, Opportunity. There needs to be an understanding from law enforcement officials that the use of private sector bribery in Indonesia is an act of bribery as stipulated in the Law on Bribery Where the Law can be used to ensnare bribery perpetrators in the private sector. Keywords: Prevention and Eradication of Bribery, Private Sector, United Nations Convention Against Corruption (UNCAC).

Fraud Management Accounting and Organizational Value Creation: Evidence from Listed Firms in Thailand

Fraud Management Accounting and Organizational Value Creation: Evidence from Listed Firms in Thailand

Treasury Single Account and Fraud Management in Nigeria: Benefits and Challenges

Treasury systems are designed to manage several critical aspects of public expenditure management. Key treasury system functions include financial planning, control of the budgetary process and management of government cash flow. However, for any treasury system to be effective, government has to ensure that it has sufficient liquidity to deal with payments, while ensuring that such liquidity costs are kept within the barest minimum. TSA is a (system of) unified structure of government bank accounts enabling optimal utilization and consolidation of government cash resources. In TSA a bank account or a set of linked bank accounts is used for all government transactions all its receipts and payments and gets a consolidated view of its cash position at any given time. This study investigates Treasury Single Account (TSA) and Fraud Management: Benefits and Challenges in Nigeria. Adopting a survey design, the study made use of primary data collected mainly through administering a set of questionnaire to104employeesofselected three Corporate Affairs Commissions in South-East, Nigeria comprising Enugu, Imo and Abia.100copiesofthequestionnaireoutof the total number of retrieved copies of questionnaire were validly completed and useful for analyses. Findings interlaid revealed that: TSA significantly reduced the incidence of fraud in public enterprises; TSA in public enterprises to a large extent reduces the credit creation of deposit money banks. The study recommends that the TSA policy will be effective if, the Fiscal Sunshine Bill is to be put in place, and if enacted will open up all financial activities of government in a way that there will be no more hiding place for those who divert or loot government money. Just like the Fiscal Sunshine Act is in place with budgeting process, implementation and contract awards, should be open for Nigerians to see how both revenues are generated and how public money is being spent by those in government, and why; Government should overhaul the capacity of the Federal Ministry of Finance and the CBN in order to cope effectively with the challenges associated with enforcement of the provisions of the TSA.

Fraudulent financial reporting motivations in emerging markets

PurposeThe purpose of this paper is to study comparatively motivations for committing fraud in financial statements in two emerging markets including Iran and Iraq.Design/methodology/approachThe research is a descriptive survey and statistical population consists of independent auditors. The field survey and questionnaire were used for data collection.FindingsFindings can raise auditors’ awareness of management fraud motivations. It can help regulators and authorities in both countries as well as other emerging markets for establishing suitable rules and regulation.Originality/valueThis paper’s contribution was in identifying and comparing management’s motivations to commit financial reporting fraud in two emerging markets including Iraq and Iran.

Fake Product Monitoring and Removal for Genuine Product Feedback

A customer’s decision to purchase a product or service are primarily influenced by online reviews. Customers use online reviews, which are valuable sources of information to understand the public opinion on products and/or services. Dependability on online reviews can give rise to the potential concern that violator could give deceitful reviews in order to synthetically promote or decry products and services. This practice is known as Opinion Spam, where spammers manipulate reviews by making fake, untruthful, or deceptive reviews to get profit and boost their products, and devalue a competitor’s products. In order to tackle this issue, we propose to build a fraud risk management system and removal model. This captures fraudulent transactions based on user behaviors and network, analyses them in real-time using Data Mining, and accurately predicts the suspicious users and transactions. In this system, we use two algorithms NLP and TF-IDF to differentiate between fake and genuine reviews or feedback received by the customers

Determinants of management fraud in the banking sector of Ghana: the perspective of the diamond fraud theory

PurposeFraud has become one of the most challenging issues facing the financial sector of most countries globally. These fraudulent transactions have led to loss of huge sums of money to financial institutions, as well as to their depositors. The current crises in the financial sector of Ghana, especially among the Deposit Taking Institutions, has largely been attributed to connected lending and lending to affiliated party institutions which are fraudulent corporate governance issues. This study, therefore, aims to assess the determinants of fraud among management staffs in the banking sector of Ghana.Design/methodology/approachThis study is anchored on the fraud diamond theory (FDT). Primary data was collected from 120 management staffs of the remaining 23 universal banks in Ghana. Estimation was done using structural equation modelling with maximum likelihood estimation technique.FindingsFraudulent activities in the banking sector of Ghana are driven by opportunities, pressure, rationalization and capacity to commit fraud, with capacity being the dominant factor.Practical implicationsThe regulator should strictly enforce the structure of shareholding as directed in the corporative governance directive to prevent ownership of a bank in the name of one person or a family, which gives high capacity to the Chief Executive Officers to misuse funds. The offenders should also be punished. Finally, the regulator should improve their supervision.Originality/valueThis study places the FDT into the context of the current banking crises of Ghana. The study therefore goes a long way to guide the regulator and government to formulate and implement policies on shareholding structure of banks.

ASP STRUCTURE: PREVENTION OFECONOMIC FRAUD

Measures to detect fraud and fraudsters have been developed in the article, including the definition of common "red flags" for a person who commits typical and accidental abuse. The main organizational control structures used to prevent fraud are identified. Evidence was analyzed in both paper and electronic formats, including big data, to form a classification of fraudsters and fraudulent activities. Possible solutions for effective fraud management and its prevention within the company by the help of ASP approach were developed. Keyworlds: fraud, economicfraud, fraudster, bribery, forensic, ASP, ACFE.

The rising trend of fraud and forgery in Pakistan’s banking industry and precautions taken against

PurposeThis study aims to investigate the involvement of employees in frauds and forgeries in banking industry of Pakistan and precautions taken against it. This research explored the types of frauds prevailing in Pakistan’s banking industry, and the causes of employee involvement in frauds.Design/methodology/approachIn-depth interviews with the officers working in fraud/compliance/risk department at commercial banks as well as the officials working in the inspection and policymaking departments at the State Bank of Pakistan (SBP) were conducted. Research questions were developed under the guidance of experts working in the banking industry, so the research possesses internal validity. Data was analyzed using thematic analysis.FindingsThis study revealed that the SBP has devised many policies and guidelines for commercial banks against fraud management, but these are not properly implemented. These policies also include precautionary measures, which are recommended by the SBP to lessen fraud. Besides this, banks are also taking initiatives of their own to control the rising trend of frauds and forgeries. At the end, brief conclusion and effective recommendations are given to the practitioners, policymakers and management.Originality/valueTo the best of the author’s knowledge, this area of management has not been explored by researchers in Pakistan; hence, this research provides valuable information to bank managers, risk management departments, risk avoidance policymakers, bank shareholders, depositors, borrowers and government agencies. This study provides deep insights into the prevalence of frauds in the banking industry of Pakistan.

Strategic management of credit card fraud: stakeholder mapping of a card issuer

Purpose The purpose of this paper is to set a framework for strategic management of credit card fraud, by mapping its stakeholders within a card issuer and outlining its ideal strategies. Design/methodology/approach The objectives are attained via case study. Primary data was collected by interviewing two fraud risk managers at the card issuer, while secondary data was collected by gathering all investor reports released from 2015 to 2019 by the financial institution. All data were submitted to content analysis and further analyzed using Mendelow’s power/interest matrix. Findings Seven groups of stakeholders were identified, the expectations of each group uncovered and KPIs proposed to measure how well the financial institution meets those expectations. Strategies to deal with and prioritize groups were outlined, while highlighting the need for repositioning stakeholders identified as potential blockers or facilitators of strategic initiatives and pressure factors in times of low performance. Practical implications Strategic management of stakeholders is essential for fraud risk managers and researchers to understand what is relevant and what is not. This paper creates a framework for addressing managerial and academic efforts based on stakeholders mapping. Further initiatives in research and practice should consider the following question: “Which stakeholder expectation will be better satisfied?” In case the answer is “none”, it is advised that the initiative be reconsidered. Originality/value Previous literature focusses mostly on the technical challenges, leaving a gap in both literature and practice for using Strategic Management. For the first time in literature, this research combines theories and terminologies from fraud risk management and strategic management.

The Role of Forensic Audit on Management Frauds in Nigerian Deposit Money Banks

This study investigates the role of forensic audit on management frauds in Nigerian deposit money banks’. Specifically, the paper examines the nexus that exists between forensic audit/accounting mechanisms on prevention of management frauds in Nigeria deposit money banks. The data for this paper were obtained from secondary source which were gathered from the audited financial statements as well as accounts of some of the listed deposit money banks in Nigeria. The study is descriptive and highly empirical as it involves the use of panel regression technique as tool of analysis. The result findings from regression analysis reveal from hypothesis one that there exist a meaningful and positive nexus between forensic audit and prevention and curbing of management fraud in Nigeria deposit money banks, also findings outcome from hypothesis two reveal that there is a strong and positive nexus between forensic audit mechanism and faithful representation of financial statements while the third hypothesis establish a strong correlation between financial accounting and understandability of financial statements. This affirms that forensic accounting/audit mechanisms are related tools towards preventing management frauds, faithful representation of financial records and understandability of financial statements. The study therefore recommends that the financial regulators as well as deposit money banks in Nigeria should undergo training and re-training of their strategic level management and staff on the intricacies of forensic accounting/audit so as to maximize shareholders wealth and be fair to other stakeholders.

“Akuma’su Adie3” (A Hearts Desire) A Metal Mural Depicting The Psychology of Fraud

Fraud has over the past decade become an epidemic, impacting not only Ghana as a country or Africa as a continent but the whole world. It has proven to be a most challenging criminal act to tackle and address and hence has left many nations stunned. In Ghana Fraud accounts for about 47.7% of victimization rate in Ghana as was recorded in a 2010 report issued by the United Nations Office of Drugs and Crime (UNODC,2010). It has since then towered in severity, manifolds. In response to this increasing menace, the need arose to establish the Economic and Organized Crime Office (EOCO). This was because the “responsibility and management of fraud as well as corruption could no longer be left to police and other quasi anti-crime organizations alone. However, with the increasing sophistication of society, complex frauds and other economic crimes, EOCO despite many efforts has even become more widespread. Education and sensitization of the masses has become ever more needed in the prevention and detection of fraud. The project hence is an attempt to contribute to the education of the public regarding the severity of fraud and the need to be aware and vigilant in regards fraudulent tricks and antics through metal art. It employs various metal working methods and techniques in creating an amazing metal art which serves as an effective communicative tool for creating awareness on the psychology behind fraudulent acts in general and in particular Ghana. The production of this art piece further, exposes and widens the practical application and creativity of metal artists. DOI: 10.7176/ADS/89-01 Publication date: January 31 st 2021

The accuracy versus interpretability trade-off in fraud detection model

AbstractLike a hydra, fraudsters adapt and circumvent increasingly sophisticated barriers erected by public or private institutions. Among these institutions, banks must quickly take measures to avoid losses while guaranteeing the satisfaction of law-abiding customers. Facing an expanding flow of operations, effective banking relies on data analytics to support established risk control processes, but also on a better understanding of the underlying fraud mechanism. In addition, fraud being a criminal offence, the evidential aspect of the process must also be considered. These legal, operational, and strategic constraints lead to compromises on the means to be implemented for fraud management. This paper first focuses on the translation of practical questions raised in the banking industry at each step of the fraud management process into performance evaluation required to design a fraud detection model. Secondly, it considers a range of machine learning approaches that address these specificities: the imbalance between fraudulent and nonfraudulent operations, the lack of fully trusted labels, the concept-drift phenomenon, and the unavoidable trade-off between accuracy and interpretability of detection. This state-of-the-art review sheds some light on a technology race between black box machine learning models improved by post-hoc interpretation and intrinsic interpretable models boosted to gain accuracy. Finally, it discusses how concrete and promising hybrid approaches can provide pragmatic, short-term answers to banks and policy makers without swallowing up stakeholders with economical and ethical stakes in this technological race.

Does Managing Occupational Fraud Add Value?

The past few years have seen the emergence of new developments in the field of occupational fraud. These have manifested themselves in the forms of both insider trading and the misrepresentation of figures in financial statement reporting. In either case, the result is a loss to stakeholders. The proposed study sets out to establish whether the systemic management of occupational fraud can add value to the firm’s wider risk management practices. It will seek to establish how the nature of these value-adding factors can be identified and analysed. The methodology adopted by this research is the collection of primary data from risk man-agers and senior-level security officers of more than fifty organisations. The study-framework employs a quantitative research design via the application of quantitative data-analysis techniques. These include descriptive and demographic statistics, frequency analysis, correlation, and regression. The principal finding of the study are that: • the use of technology, artificial intelligence and blockchain, alongside government regulation, reinforces fraud risk management. • the removal of third parties adds value to the risk-management practices of the organisation concerned. • the use of whistleblowing is shown to be an effective risk-prevention measure. • the existence of ‘excessive trust’ relationships can increase the risk of occupational fraud. The overall conclusion is that the possibility of occupational fraud can be managed and significantly reduced. This can be achieved with the assistance of artificial intelligence, block-chain and whistleblowing.