| dc.description.abstract | The study set out to examine the effect of internal controls on fraud in banking institutions,
zeroing on one banking institution as a case study, with the following objectives:
• Find out and document the types of fraud within the Ugandan banking system.
• Investigate the causes of bank fraud and management response mechanisms on the
discovery of fraud.
• Assess the effect of the existing internal controls towards checking fraud within the
Ugandan banking sector.
Barclays Bank, Uganda being one of the largest banking institutions in the country was used as a
case study. With a combination of purposive and systematic sampling methods, Barclays Bank
branches of Head office-Jinja Road, Garden City, Nakawa (URA), Makerere and Lugogo branch
were selected. Systematic sampling was employed for selection of respondents. Primary data
were collected by the use of face to face interviews, Focus Group Discussions and Key
Informant Interviews. Qualitative data was thematically analyzed while quantitative data was
analyzed with the help of SPSS software.
In all, one hundred and fifty four (154) interviews were conducted. 51respondents were bank
employees and 103 bank clients. All the bank employees and 82% of the clients interviewed
held accounts with Barclays Bank. More of the bank employees than clients were satisfied with
the bank services provided. Bank robbery, ATM money theft, Bribery, money missing from
account and bouncing cheques were the lead fraud incidences reported. The study shows that
57% of the fraud incidences were a result of collusion between employees and clients. Self
discovery was the mechanism through which two thirds of the respondents discovered fraud.
Despite the high reported fraud incidence, only 49% of the respondents reported they incurred
fraud cases. Lack of confidence and fear of negative publicity on the bank’s side were hindering
factors towards fraud reporting to the relevant authorities. On discovery of fraud, the main
action taken was the sacking of the people involved in case of staff members and account
freezing for the clients.
Seventy nine percent of the clients reported none existence of internal controls designed to curb
fraud in Barclays Bank and only the IT systems controls were reported by 21%. However, to the
bank employees, internal controls were existent and included external and internal audit reviews,
external and internal whistle blowing run by the bank. All the clients were of the view that the
main cause of increased fraud cases was due to weak internal controls within the banking sector.
Poor customer care and low staff remuneration were further discussed as fraud triggers. On the
overall, to the clients the very few existing internal controls did not offer adequate protection
against fraud while to the employees, the internal controls exist but are not very effective.
To fight fraud within the banking institutions, there is need to embark on public education and
awareness campaigns aimed at informing the masses about fraud incidences. More so, there is
need to devise better mechanisms for handling customer complaints. This will enrich the trust
customers have towards the banks regarding their problem handling. The long Police
investigative processes after initial reporting of fraud needs to be addressed especially in cases of
internal bank staff collusions or collusions with clients.
Currently, in Uganda there is no fraud policy. Fraud is viewed as a criminal case which in some
instances is hard to prove. There is need for the development of a fraud policy that clearly
defines the types of bank fraud and penalties involved. | en_US |
