Despite several control systems being in place, banking institutions are becoming more and more vulnerable to fraud with time. Nowadays, fraudsters can more easily design their method of operation to get around controls.
Both internal (from staff) and external sources could be the source of the fraudsters (customers, suppliers, contractors, and lawyers).
Due to the vast range of activities that financial organisations are involved in, fraud may have an impact on a number of parties, including shareholders, depositors, borrowers, employees, and the banking institution itself.
It is not hyperbole to argue that the biggest fraud risk to banks comes through the door each morning and starts working. A major global issue is employee fraud committed by banks.
The Association of Certified Fraud Examiners (ACFE) analysed 2,504 incidents of internal fraud from 125 countries, with damages pegged at $3.6 billion, according to the ACFE’s 2020 report. The majority of internal fraud instances evaluated by ACFE involved the banking and financial services industry. No company is safe from fraud. Because there are so many genuine transactions made every day, it can be particularly difficult to spot fraudulent operations in the banking industry.
Despite the top management’s best efforts to eradicate fraud, there is no magic solution other than raising employee knowledge of the behaviours that qualify as fraud. Therefore, to effectively prevent and identify fraud within banks, all deterrent, prevention, detection, mitigation, analysis, policy, investigation, and punishment must be put into place at the same time.
