Challenges Facing Management of Fraud Cases in Commercial Banks in Kenya: a Case Study Of Nairobi CBD

Abstract

This study focused on influence of Bank Fraud Investigations Unit in management of fraud cases. Fraud is a major problem in the world that is not set to end in the near future. Supervision and regulation have not been sufficient in dealing with fraud related challenges in banks due to lack of participation by policymakers, financial institutions and consumer society groups. This study aims to contribute to the knowledge and understanding of factors influencing Banking Fraud Investigation Unit mandated to investigation and management of fraud risk in Kenya. The specific objectives for this study are; to establish characteristics and factors influencing banking fraud cases; to establish the influence of investigation mechanisms on security risk management of banking fraud cases; and to determine the challenges that influence security risk management in prevention of banking fraud cases in Kenya. This study was anchored on Rational Choice Theory and Social Control Theory. This study used a sample size of 150. This study used descriptive research survey design that enabled the use of both qualitative and quantitative data from the CBK‟s BFIU officers who were included in the study. Key informants were selected by snow ball sampling from former BFIU officers and staff from Commercial banks. Data were collected using both questionnaires and interview methods. Data was analyzed both descriptively and inferentially using Statistical Packages for Social Sciences (SPSS) software. Analyzed data were presented in tables, charts. The Qualitative data from the interview guide was analyzed by content analysis and presented as verbatim reports and narratives. Both the quantitative and qualitative data were then be interpreted by the Researcher and presented as research findings in prose form. The study found out that indicates that BFIU has succeeded (60%) in fight against bank fraud in Commercial Banks of Kenya. This implies that the use of BFIU in prevention of bank fraud is important because of trained skills and knowledge. Further, the finding indicated that low or non-existent fraud budgets for detecting and preventing fraud, ineffective judicial systems, insufficient industry co-operation, inadequately educated police and prosecutors, and weak government regulatory frameworks are among the internal and external elements involved in commercial Bank fraud in Kenya. The study is expected to inform on review of Banking Fraud Investigation Unit and contribute knowledge gap on fraud risk management mechanism. The research could also help personnel, particularly top policymakers, make better judgments in the future when it comes to fraud detection and prevention.