PREVENTION AND CONTROL OF FRAUD IN COMMERCIAL BANKS IN PAKISTAN
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PREVENTION AND CONTROL OF FRAUD IN COMMERCIAL BANKS IN PAKISTAN
ABSTARCT
As fraud is being committed at an increasing rate, more and more attention and research are being focused on the study of fraud prevention and control. Commercial bank frauds are as old as the business itself. The conducted research dug into important topics including fraud kinds, fraud causes, and the efficacy of fraud prevention strategies.
The main contributors to fraud in commercial banks are socioeconomic factors, misguided social norms, a deficient internal control structure, and a lack of a corporate culture that discourages fraud.
Among other things, preventive measures include tighter staff oversight, effective personnel training and rotation, and swift legal action against fraudsters.
The study’s conclusions and beneficial recommendations include the following: management oversight of long-serving officers in positions of trust; complete, effective checks and balances; management information systems; and review procedures.
Only once the larger Pakistani society develops a stronger sense of discipline, accountability, and patriotism will the prevalence of fraud in commercial banks be reduced.
CHAPTER ONE
INTRODUCTION
BACKGROUND OF THE STUDY
Fraud has eaten deeply into the fabric of the country like a “cankerworm.” It is evident across the board in the economy. Fraud in the financial sector is a “offshoot” of financial crimes that includes offences relating to securities and that include the movement, transfer, or use of money instruments in situations where doing so is prohibited.
The aforementioned definition can be expanded to cover any dishonest, unethical, or unprofessional behaviour that causes someone or an organisation to suffer financial loss for the advantage of someone else.
Cheque-kiting, loan fraud, advance fee fraud, securities fraud, account opening fraud, carelessly clearing fraud, computer fraud, telex fraud, and money laundering are only a few examples of financial fraud.
As was previously said, fraud affects not only the banking business but also other areas of the economy. Frauds in the banking business are nothing new; in fact, they predate the industry itself.
However, the practise has grown alarmingly widespread in recent years. The act is occasionally carried out by outsiders, but the majority of the time, staff members and outsiders work together to commit this financial crime.
Furthermore, one of the biggest risks to the development and practise of banking in Pakistan is unquestionably the fraud and corruption that plague today’s institutions. There are no outward indications that the trend will be reversed because it has grown to such terrible proportions.
In terms of law, fraud is defined as the purposeful use of deception to obtain an unfair advantage. It can also be defined as the act of denying someone something to which they would or might be entitled.
Therefore, for any conduct to be considered fraud, there must be a dishonest intention on the part of the perpetrator to gain something at the expense of another individual or organisation.
Fraud often involves stealing from accounts and manipulating them, and the theft is commonly covered up. Additionally, the conversion of the stolen goods into one’s own goods is a part of it.
STATEMENT OF THE PROBLEM
This fact was also supported by studies by Nwaze (2009), Okpara (2009), and the CBN report (1995), which emphatically stated that no fraud will be successful without the input of management employees.
Fraud in the National Bank of Pakistan is increasing at an alarming rate, primarily because the main perpetrators are internal staff and some corrupt members of the top management.
The challenge of this study is to figure out why the most dependable member of management is frequently the mastermind behind fraud at most financial institutions.
Additionally, earlier studies by Ola (2001) and Izedonmi (2000) have strengthened the argument that the management of the majority of Pakistani commercial banks can effectively prevent and handle fraud.
This study paper attempts to investigate the fraud control and prevention in Pakistani commercial banks against this background in an effort to ascertain why management has been unable to address the issue of fraud in the majority of commercial banks.
OBJECTIVES OF THE STUDY
The study’s aims are;
To determine whether managerial control is to blame for the failure of the internal audit systems at the chosen commercial banks in Pakistan.
To ascertain whether management control has an impact on whistle blowing in Pakistan’s chosen commercial banks
to determine how to stop fraud in Pakistani commercial banks
RESEARCH HYPOTHESES
The researcher developed the following research hypotheses in order to successfully complete the study:
H0: The internal audit systems of the chosen commercial banks in Pakistan were not compromised by managerial control.
H1: Management control is a factor in the internal audit systems of a few Pakistani commercial banks failing.
H02: It is impossible to stop fraud in a Pakistani commercial bank.
H2: Fraud in Pakistani commercial banks can be stopped.
SIGNIFICANCE OF THE STUDY
Even if this research is incomplete due to the lack of key crucial data and the time constraints, all of it relates to financial institutions.
This study is also intended for anyone who might be eager to conduct additional research on fraud, particularly as it relates to financial organisations.
However, the banks would gain a lot from this research effort in terms of preventing and managing frauds in their banks, and they may accomplish this by adopting and implementing the many management control system strategies provided by this study.
SCOPE AND LIMIITATIONS
The study’s focus is on fraud control and prevention in Pakistani commercial banks. The study’s scope was constrained due to a constraint the researcher encountered;
a) AVAILABILITY OF RESEARCH MATERIAL: The researcher’s access to suitable research material limits the investigation.
b) TIME: Because the researcher must juggle the study with other academic obligations and exams, the time allotted for the investigation does not improve wider coverage.
1.7 DEFINITION OF TERMS
Preventing anything from happening or emerging is the act of prevention.
Fraud is the unlawful or criminal use of deception with the goal of obtaining money or other benefits.
A commercial bank is a particular kind of bank that offers basic investment goods and services including collecting deposits and making business loans. Commercial banks are run as for-profit businesses.
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