Exploration of Factors Influencing Fraudulent Activities in Banks in Kenya A Case of XYZ Bank

Abstract

The main aim of this research Project was to investigate the factors contributing to incidences of fraudulent activities in banks with special reference to XYZ bank. The increase in incidences of frauds in the banking sector has had an effect on the overall financial performance of banks. Fraudulent activities have been a major concern to the Bank's top management, especially as these activities become more complex. The objectives of the study were to investigate the cause of frauds, establish the adherence to internal controls and compliance to procedures, and determine the influence of morals and the personality and integrity of individuals and employees as a contributory factor to frauds and to explore the lack of training as a factor in frauds. The study was conducted in 39 branches out of the 117 of the XYZ bank. This was a sample size of 117 managers out of a total population of 600 managers that comprises XYZ bank entire branch network. This entailed collecting data through questionnaires and conducting interviews with employees of the bank. The study utilized the descriptive research method, with a total of 93 questionnaires received out of the 117 sent out. The respondents were drawn from three cadres, which included one Retail Manager, one Operations Manager, and one Cash Manager, each completing the questionnaire. 31 out of a total of 39 branches participated in the study. The data collected was analysed qualitatively and quantitatively using descriptive statistics. The findings of the study revealed that the majority of frauds in the XYZ bank were cheque frauds. Most of the frauds were caused by lack of compliance and weak internal controls. Lack of training was also a contributory factor in the fraudulent activities, while low morale and personal integrity of individuals influenced the fraud perpetrators. Based on the findings and conclusions, it was recommended that there should