Employee Fraud in the Banking Sector of Ghana

by
Ekow Nyarko Dadzie-Dennis, D.B.A., Livingstone Caesar, Ph.D., Kyeame Ghansah, M.Sc.
and Jonathan Tetteh Korletey, M. A.

Abstract

Employee fraud has been identified as a threat in the banking sector. This study, therefore, aims to identify
the factors that drive employee fraud and determine their relationships. It also identifies the types of bank
fraud committed by employees. The study employs a quantitative approach to investigate the phenomenon.
Data was collected using questionnaires administered to 250 employees of 20 selected banks, across the ten
regional capitals of Ghana. The data collected were analyzed using descriptive statistics and multivariate
regression analysis. The findings of the study provide that bank fraud is prevalent in the Ghanaian banking
sector and it is considered as an act that is committed by both managerial and non-managerial staff with
factors such as capability, opportunity and internal controls being the main drivers. These, notwithstanding,
the study implies that it is also important to note that there are other factors that have not been studied in this
article that may also contribute to employee fraud.

Keywords:

Fraud; Employee fraud; Banking; Bank of Ghana; Internal control; Bank fraud; Corporate culture

Introduction and records, involving recording transactions with-

out substance.
In spite of the fact that the banking industry is a
controlled and regulated industry, employee fraud In recent times, the occurrence of employee fraud
has assumed a different dimension in this indus- in the banking industry of Ghana has assumed an
try and has continued to cost banks. The impact alarming proportion. According to Samociuk, Iyer
of employee fraud on the operations of banks in and Doody (2010) “there is not a single financial
Ghana, and indeed the economy at large, is of organization that is immune to employee fraud,
interest to researchers and industry practitioners. and that the typical organization loses 5-7 percent
Employee fraud has been identified as a threat in of its annual revenues to fraud” (p. 3). Though
the banking sector (Nwankwo, 1991; Oseni, 2006). some acts of employee fraud were recorded de-
Fraud, in general, is defined by Anyanwu (1993) cades ago, the current trend is worrying, since,
as an act of deception deliberately practiced to employee fraud in any institution reduces the oper-
gain unlawful or unfair advantage over others. The ating assets of that institution and increases the op-
International Standard on Auditing (ISA) defines erating liability. It generates reputational setbacks,
employee fraud as an intentional act committed by which in most cases result in the loss of existing
one or more individuals in an organization, or third and potential customers.
parties involving the use of deception, to obtain
an unjust or illegal advantage. Most fraudulent This development is of great concern to the stake-
activities, that occur in banks, are perpetrated by holders in the banking sector. According to Awuge,
employees of banks. Bank fraud may include ma- Obeyaa, Ampiah, Urbanus and Asiniembisa
nipulation, falsification or alteration of documents, (2013), employee fraud has diverse socio-econom-
intentional misapplication of accounting policies ic effects which include bank failure leading to

4
merger and acquisition, loss of job, loss of share- fraud on the part of the employee, without forget-
holder wealth and investment, capital erosion, loss ting bribery and corruption.
of income, loss of employment, reputational risk,
suicide, death, divorce, or imprisonment. These Employee fraud is mainly characterized by several
show that employee fraud poses serious threats activities including cash theft from bank tills, forg-
to the banking industry and the society at large. eries of customers’ signatures with the intention
Therefore, there is a need to investigate the phe- of withdrawing monies from their accounts, open-
nomenon to the factors that drive employee fraud ing and operating fictitious accounts, and illegal
in the banking sector. transfer of funds to other accounts, claiming of
overtime for hours not worked, fund diversion, and
Literature Review computer fraud via compromising log-in creden-
tials of an e-banking user (Akinyomi, 2012; King-
Fraud can be classified into three primary groups; sley, 2012; Tchankova, 2002). While management
fraud that has been exposed and is publicly known, have access to tangible assets and the accounting
fraud that has been discovered by an organization systems that record and track the activities of their
but not made public, and fraud that has not been employees, employees also use the same systems
detected (Silverstone & Davia, 2005). However, to conceal their identities and theft.
it has been asserted that about only 20 percent of
fraud is exposed. The reasons given indicate that Finally, in addition to management and employee
most fraud is discovered accidentally; independent fraud, there is also customer fraud, such as false
auditors do not proactively audit to detect fraud; claim applications, fraudulent claims and the sub-
entities without internal control staff cannot audit mission of false financial information to banks for
to detect fraud proactively; most internal auditors loan applications.
do not have adequate training or experience to de-
tect fraud proactively; and most internal controls Theoretical Perspective
are inadequate to prevent fraud (Silverstone & Da- The Drivers of Bank Fraud
via, 2005; Wells, 2004).
From the perspective of the triangular fraud theory,
However, Elliot and Willingham (1980) catego- for fraud in an organization to be successful, three
rized fraud into management fraud and employee things must exist, namely, opportunity, pressure
fraud. Management fraud is committed by mana- and rationalization (Wells, 2005), but in extending
gerial employees and consists of, but is not limited this theory using the fraud diamond theory, Wolfe
to, financial statement fraud, misrepresentation and Hermanson (2004) were of the view that, when
of material facts, misappropriation of assets, con- the person committing the fraud is not with the
cealment of material facts, illegal acts, bribery, right capability, then the fraud will not be possible.
corruption, and conflict of interest. Pedneault,
Silverstone, Rudewicz, and Sheetz (2012) added Pressure from Employees and Bank Fraud
that, management fraud involves the manipulation
of earnings reported in the financial statements Pressure relates to the motivation that leads to un-
prepared for shareholders and creditors. This type ethical behavior. Pressure can result from various
of fraud affects stock prices, management bonuses, circumstances, but it often involves a non-share-
availability, and terms of debt financing. able financial need. According to Albrecht, Al-
brecht and Albrecht (2006) about 95 percent of all
On the other hand, employee fraud is committed cases of fraud have been influenced by financial
by non-managerial employees and consists of, but pressure. Pressure to commit fraud may be as a re-
is not limited to, embezzlement, breach of fiducia- sult of employment stress, external factors, person-
ry duties, and theft of trade secrets or intellectual al factors, social pressure (maintaining status) and
property (Elliot & Willingham, 1980). Additional inability to attain or achieve goals. Hillison, Pacini
items like pilferage, petty theft, false overtime and Sinason (1999) found that numerous employee
claims, sick leave abuse, and use of company as- situations are consistent with actual or perceived
sets for their own benefit can also be viewed as pressure. For example; Greed or preoccupation

5
with being successful, living beyond one’s means, ture is fundamental to designing effective fraud
high personal debts, high medical bills, poor credit controls since there is a strong correlation between
or inability to obtain credit, unexpected financial an organization’s ethics and culture and its vulner-
needs, personal financial losses, expensive habits ability to fraud. As result when an organization has
such as the use of drugs, alcohol or gambling, illic- a weak culture, it creates the opportunity for an
it sexual relationships, work related pressure such individual to commit fraud. For example, the ab-
as low pay, failure to receive a promotion, unfair sence of controls, ineffective controls, or the abil-
treatment, lack of respect or dissatisfaction with ity of management to override controls— provide
one’s job, boredom, the challenge to see if you can an opportunity for a fraud to be perpetrated. The
beat the system without getting caught, and spouse researcher thus hypothesizes that;
or family related imposed pressures (Hillson et al.,
1999). The researcher is of the view that, when H1b: Opportunities for employees is positively
there are high levels of pressure on employees of related to employee fraud in the banking
banks, the likelihood of bank fraud is high. Based sector of Ghana.
on the above review, the researcher hypothesizes
Rationalization of Other Activities of Employees
that;
and Bank Fraud
H1a: Pressure on employees is positively related to
The concept of rationalization suggests that those
employee fraud in the banking sector of Ghana
who commit fraud must formulate some type of
Opportunity for Employees and Bank Fraud morally acceptable reasons before engaging in un-
ethical behaviour. For example, “I had to steal to
Opportunity is the first important factor motivating provide for my family” (Cressey, 1986). According
fraud. Opportunities to commit fraud represent to Hooper and Pornelli (2010), people who engage
gaps, deficiencies, weaknesses and loopholes in the in fraud possess some kind of mind-set that allows
internal control systems of a business that an em- them to justify or excuse their fraudulent behaviour
ployee can utilize to commit fraud (Wilson, 2004). or action. It must be noted that, the propensity to
Hillison et al. (1999) found that opportunities to commit fraud depends on people’s ethical values
commit fraud can arise when an employee acquires as well as on their personal circumstance. Ethical
absolute trust in an organization where the internal behaviour is motivated by a person’s character and
controls are weak or non-existent. The employee external factors, which include job insecurity. This
will then perceive that an opportunity exists to justification for the act of fraud often leads to fraud
commit fraud, conceal it and avoid detection. List- in the business. Justification of the acts of fraud
er (2007) saw opportunity as the “fuel that keeps can also emanate from the actions of superiors who
the fire going” and according to him even if a per- engage in fraud. Junior employees in banks will
son has a motive, he or she cannot commit fraud therefore engage in fraud with the rationalization
when the opportunity is not created. He therefore that other employees are doing it; the earnings of
gave some examples of opportunities that contrib- the bank are adequate to cover the losses caused;
ute to fraud such as high turnover of management or the employees are angry at the bank(Hollinger
in key roles, lack of segregation of duties, complex & Clark, 1983).
transactions, complex organizational structures,
weak board of directors, lack of circumvention According to Pfeffer (1995) it is stated in the AU
of control to prevent/detect fraudulent behaviour, Section 316, paragraph 7 that:
failure to discipline fraud perpetrators and weak
Those involved are able to rationalize commit-
culture within the working environment (the ways
ting a fraudulent act. Some individuals possess
of doing things within organization).
an attitude, character, or set of ethical values
Deloitte (2005) postulated that culture is a good that allow them to knowingly and intention-
barometer for measuring an organization’s suscep- ally commit a dishonest act. However, even
tibility to fraud and error. According to an article otherwise honest individuals can commit fraud
by Deloitte, understanding an organization’s cul- in an environment that imposes sufficient
pressure on them. The greater the incentive or
6
 pressure, the more likely an individual will be created within an otherwise good person when she/
able to rationalize the acceptability of commit- he commits bad acts. Hence;
ting fraud. (p.12)
H1d: The capability of an employee is positively
In the International Standard on Auditing (ISA) related to employee fraud in the banking
240, audit team members are required to discuss sector of Ghana.
the susceptibility of the entity’s financial state-
ments to material misstatement due to fraud and Poor Corporate Culture and Bank Fraud
urged them to consider both internal and external Corporate culture is defined as the behaviour
factors affecting the entity that might create pres- learned over time in the different phase of an orga-
sures for management and others to commit fraud, nization’s life. In the early stages of an organiza-
as well as provide the opportunity for fraud to be tion, corporate culture and behaviour is learnt from
committed (Kassam & Higson, 2012). the founder and the leaders of the organization
This is therefore an indication that the working (Hofstede, Garigaldi de Hilal, Malvezzi, Tanure &
environment of an organization enables employ- Vinken, 2010). In the second phase of developing
ees /management to rationalize committing fraud. corporate culture, fraud and corrupt practices may
Therefore; be institutionalized through the development of
norms when a critical incident takes place (Ash-
H1c: Rationalization of activities by others is posi- forth & Anand, 2003). Bank fraud if unchecked,
tively related to employee fraud in the bank- will make it a normal institutional practice, espe-
ing sector of Ghana. cially if the heads are involved. Researchers such
as (Manz, Anand, Joshi & Manz, 2005; Schein,
Capability of Employees and Bank Fraud 1990) are of the view that, poor corporate cul-
Wolfe and Hermanson (2004) believed many ture impacts on bank fraud. It should therefore
fraudulent acts would not have occurred without be understood from the literature that the culture
the right person with the right capabilities im- of an organization can breed issues of fraud and
plementing the details of the fraud. According to corruption in an organization through the process
Wolfe and Hermanson (2004), although perceived of institutionalization. If an organization tolerates
pressure might coexist with an opportunity and a corrupt and fraudulent practices, it becomes a
rationalization, it is unlikely for fraud to take place routine activity and part of the structure of the or-
unless the fourth element (i.e., capability) is also ganization which influences the ideals, behaviour
present. In other words, the potential perpetrator and activities of the workers. The study therefore
must have the skills and ability to commit fraud. hypothesizes that;
Wolfe and Hermanson (2004) maintain that oppor- H2: Poor corporate culture is positively related to
tunity opens the doorway to fraud, and incentive employee fraud in the banking sector of Ghana.
(i.e. pressure) and rationalization lead a person
toward the door. However, capability enables the Inefficient Internal Controls and Bank Fraud
person to recognize the open doorway as an op-
portunity and to take advantage of it by walking Internal controls refer to the systems put in place
through repeatedly. An individual’s continuous in- by managements of organizations to provide the
volvement in fraud produces his or her habit which platform for the achievement of organizational
then leads to capability due to the fact that, that objectives. According to Ayagre, Appiah-Gyam-
person is also engaging in the fraudulent act. They erah and Nartey (2014) internal controls are not
also suggested four observable traits for commit- outcome oriented, but rather process oriented to
ting fraud; (1) Authoritative position or function ensure compliance of applicable laws and reg-
within the organization, (2) capacity to understand ulations, reliability of financial reporting and
and exploit accounting systems and internal con- effectiveness and efficiency of an organization’s
trol weaknesses, (3) confidence that she/he will operation. It implies that internal controls (ICs) are
not be detected or if caught she/he will get out of the backbone of any risk management focus and
it easily, and (4) capability to deal with the stress dynamic organization. However, some researchers

7
have argued that no matter how robust ICs may be, Smeets, Poon & Bodensjo, 2006). Based on the
it is in itself not a panacea to employee fraud and above review, the researcher hypothesizes that;
often deteriorates over time. The belief is that an
efficient internal control system can be sustained H3: Ineffective internal controls are positively re-
and thus prevent employee fraud. Five primary lated to employee fraud in the banking
factors that contribute to internal control illusions sector of Ghana
are organizational size changes, technology im-
provements, process changes, failure of physical
safeguards, and employee failure to perform (At-
wood & Elliott-Sinnock, 2012).

Internal control is made up of five key compo-

nents. These are control environment, risk assess-
ment, control activities, information and commu-
nication, as well as monitoring of control. The
control environments indicate the total contribution
by the boards and management of banks in achiev-
ing the needed discipline as well as the appropriate
structure that will guarantee right internal control
with respect to banks’ operations. Figure 1. A conceptual model of bank fraud

Ahmad, Bosua and Scheepers (2014), in their Methodology

study on managing bank fraud, outlined some
strategies for preventing and detecting fraudu- Sample and Data Collection
lent transactions in financial institutions. These
The study sample consisted of employees of se-
strategies include a management control system,
lected banks in the regional capital. We focused
financial control strategy, personal control strategy,
specifically on the main head offices of banks in
accounting control strategy, credit control strat-
all the regions. Out of the 35 commercial banks
egy, cost control strategy, administrative control
currently licensed by Bank of Ghana, we randomly
strategy, process control strategy, and a budgetary
selected 20 samples from all the head offices. We
control system. The Basel Committee (1998) as-
sent introductory letters to all the Managing Direc-
serts that, weak internal controls by banks make
tors of the banks to introduce the study and to seek
the bank susceptible to both internal and external
permission to encourage staff to participate. A total
fraud. The systems theory makes a meaningful
of 20 banks agreed to take part in the study. Using
contribution by saying that, there is the need for
a list of all the banks’ employees, we randomly
banks to focus on their internal system since fail-
selected 250 bank officers to take part in the study.
ure in one component of the bank’s system will
We collected the questionnaire a day after giving it
lead to the failure of the whole system. Some re-
to them since they were briefed on the purpose of
searchers stress that, the internal controls of banks
the study and also because permission was sought
include correction of deficiencies, IT monitoring
from the right authority. We received a response
activities, as well as oversight and control mech-
rate of 224 representing 74.67% (this included
anisms which are put in place by management of
those who agreed to take part in the study and
banks to prevent fraud. The bank is open to fraud
those who completed their questionnaires). To de-
when its internal controls are compromised by ei-
termine whether there were differences in samples
ther top management or employees. Ayagre et al.
of those who agreed to take part in the study and
(2014) opined that it is important for management
those who did not take part in the study, we took
to periodically review the internal controls of the
20 of the sample for those who were not part and
bank. This is because effective internal control
compared their demographic backgrounds for pos-
is able to protect the entity against any external
sible differences. We found out that, there were no
attacks and any internally unauthorized activi-
significant differences in the two groups in terms
ty (Amudo & Inanga, 2009; Humphreys, 2008;
8
of their age, gender, years of working in banks, Section ‘D’ of the survey instrument measured the
and position. This makes our selected and usable incidence of fraud (i.e. if bank staff knew anyone
sample right for the study. who had committed fraud against their bank), the
types of fraud (i.e. type of bank fraud the person
Regarding the bank employee characteristics, a committed) and the acts respondents perceived to
higher percentage of respondents who participated constitute as bank fraud which was measured on a
in the survey were males (58%). Other characteris- 5-point scale of 1=Strongly disagree to 5-Strongly
tics were as follow: agree. Section ‘E’ of the questionnaire was used to
Age - (18-30 years= 19.2%, 31-40 years=50.9%, collect the socio-demographic information of the
41-50 years=18.3%, 51-60 years= 9.8% and 61 and respondents.
above years= 1.8%) We conducted 20 initial in-depth interviews with
bank employees to ensure face validity of the
Educational level - (diploma= 6.3%, de- measures. With the interviews, respondents were
asked to indicate the relevance of the items used
gree=32.1%, post-graduate=61.6%) in measuring each section of the construct. To
address content validity in this study, a thorough
Position in bank - (legal service officer=8%, recov-
review of the extant literature was made to select
ery assistance officer= 8.9%, HR and administra-
the bank fraud factors identified in previous stud-
tive officer= 8.9%, auditors= 5.4%, bank support=
ies. We further examined the validity of the study
4.5%, research officer= 4.5% and risk officer=
using the recommendations of Atuahene-Gima
4.5%),
and Li (2002). First, we conducted an Exploratory
Working experience - (1-5 years= 8.5%, 6-10 Factor Analysis to assess the factor loadings and
years= 41.5%, 11-15years= 35.3%, 16-20 years= to ensure that the first factors did not account for
12.1%, 21-25 years= 1.3% and 26 years and majority of the variance in the dependent variable.
above= 1.3%). The 103 Likert scale items developed to measure
factors that drive bank fraud, corporate culture and
internal control were subjected to principal com-
Measurement Development and Validation
ponents analysis (PCA) using the SPSS (v20) soft-
The study’s research questions, objectives and hy- ware programme. Prior to performing the PCA, the
potheses informed the development of the items suitability of data for factor analysis was assessed.
for the questionnaire. The questionnaire crafted for The Kaiser-Mayer-Okline obtained value of 0.7,
this study was a self-reporting structured question- which is above the suggested minimum value of
naire utilizing mutually exclusive and exhaustive 0.6 (Kaiser, 1974; Pallant, 2011) indicated that the
responses, which facilitated numerical coding of sample size of the study was adequate and suitable
data. The entire instrument was subdivided into for the factor analysis. The Bartlett’s Test of Sphe-
five (5) sections; A, B, C, D and E. Section ‘A’ ricity was also statistically significant (p=0.000)
consisted of questions measuring the factors that supporting the factorability of the correlation ma-
drive bank employees to commit fraud. The ques- trix and the appropriateness of the factor analysis
tionnaire items developed were sub-grouped under method. A close inspection of the correlation ma-
the following factors; Pressure, Rationalization, trix indicated that many of the coefficients exceed-
Capability and Opportunity. Section ‘B’ measured ed 0.3 which shows that the items correlate quite
respondents’ perception of the influence corpo- well. Before the creation of composite scores,
rate culture has on employee fraud in the banking the reliabilities of the constructs were computed.
sector. Section ‘C’ consisted of eleven (11) items Cronbach’s coefficient alpha determines reliability
developed to measure the extent to which bank based on internal consistency and provides a good
staff perceived that internal control mechanisms/ estimate of scale reliability (Pallant, 2011).
components such as; Control environment, risk
assessment, control activities and monitoring
helped in checking employee fraud in the bank.

9
Analysis and Results sion (9.8 percent), cash theft (9.4 percent) and
property fraud (8.9 percent), as seen in the Table 2.
In this study, standard multiple regression was
used to assess the impact of pressure, rationaliza- Table 2. Prevalence of Bank Fraud Committed in
tion, capability, opportunity, corporate culture and
the Ghanaian Banking Sector
internal control in predicting bank employee fraud.
Variable Frequency Percentage
Descriptive Statistics of Factors that Drive Em-
Know someone who committed
ployee Fraud bank fraud
Yes 212 94.6
The analysis of the results on which acts the re-
No 12 5.4
spondents considered to be fraudulent in the bank-
Type of fraud committed
ing sector indicates that unauthorized withdrawal
Unauthorized withdraw- 45 20.1
from customers’ accounts is the most common type al from customers ac-
of fraudulent act. This recorded the highest mean count
value of 4.58. Kick-backs, expense account fraud False benefits claims 44 19.6
and property fraud also constituted the three most Cash suppression 26 11.6
common fraudulent acts committed (each record- Cheque suppression 22 9.8
ing a mean greater than 4.44). Cash theft 21 9.4
Property theft/fraud 20 8.9
Table 1. Descriptive Statistics of Fraud Committed Manipulation of ATM 11 4.9
by Bank Staff Appropriation of loan re- 10 4.5
payment of clients

1=Strongly disagree 5=Strongly agree Kick-backs 8 3.6

Expense account fraud 8 3.6
Employee Fraud Mean (Stan- Corresponding scale
dard Devia- category Palding 7 3.1
tion) Fake certificates 2 .9
Unauthorized with- 4.58 (.678) Agree
drawal from custom- In establishing the set of factors that significantly
ers account drive employee fraud in the banking sector, the
Kick-back 4.46 (.655) Agree results, as indicated in Table 3, show that undue
Expense account 4.46 (.590) Agree pressure emanating from family, organization and
fraud or community prospects; antipathy of superiors, in-
Property fraud 4.45 (.845) Agree timidation and job frustration; perceived differen-
Cash suppression 4.36 (.714) Agree tial and unequal treatment; as well as social work
False benefit claims 4.35 (.730) Agree and environmental distress can drive bank staff to
Cheque suppression 4.34 (.805) Agree commit fraud.
Theft of cash 4.32 (.827) Agree
Padding 4.29 (1.140) Agree On rationalization of fraud, the results of the study
Embezzlement 4.19 (1.039) Agree
showed that there is a consensus among the re-
spondents to show that rationalization is based on
Appropriation of 4.19 (1.293) Agree
loan repayments of the justification of employee’s criminal act.
clients
However, it was observed that opportunity to com-
From the results of the study, it is indicated that mit fraud as well as employees’ capability to com-
94.6 percent of the respondents affirmed that they mit fraud also drives employees to commit fraud.
knew someone who committed bank fraud. How- Overall, it can be seen that all four factors present-
ever, the common frauds committed by bank em- ed in the model were found to be the drivers that
ployees as identified by the respondents include instigate bank employees to commit fraud.
unauthorized withdrawal from customers’ account
(20.1 percent), false benefits claims (19.6 percent),
cash suppression (11.6 percent), cheque suppres-

10
Table 3. Descriptive Statistics of Factors that Drive
Employee Fraud

1=Strongly disagree 5=Strongly agree

Factors Mean (Standard Corresponding scale category
Deviation)
Pressure
Undue family, organization and or community prospects 4.40 (.798) Agree
Antipathy of superiors, intimidation and job frustration 4.39 (.744) Agree
Perceived differential and inequality treatment 4.25 (.988) Agree
Social, work and environmental distress 4.21 (.985) Agree
Work related pressures such as unfair treatment and 3.42 (1.347) Agree
non-promotion
Rationalization
Fraud is justified by employee‘s criminal or questionable 4.50 (.852) Agree
historical background
Fraud is justified by an employee‘s inconsistent be- 4.25 (.887) Agree
haviour
Fraud is justified by a strong desire to beat the system 4.24 (.962) Agree
Fraud is justified by being underpaid 4.20 (.863) Agree
Fraud justified by poorly recommended employee with 4.14 (.777) Agree
poor financial status
Capability
Job or work overlap 4.38 (.838) Agree
Persuasive ability 4.34 (.919) Agree
Exercising an excessive power 4.32 (.870) Agree

Opportunity
Less supervision 4.63 (.527) Agree
Frequent operation in unfavourable climate 4.60 (.688) Agree
Lack of general and precise personnel policy 4.50 (.621) Agree
Improper record of commendation on personnel 4.47 (.831) Agree
dishonest act
Dishonest or overlapping duty by dominant man- 4.44 (.773) Agree
agement
Lack of supervision and attention paid to details 4.42 (.944) Agree
Complex organizational structure 4.42 (.678) Agree
Lack of executive disclosures and examinations 4.36 (.867) Agree
Continuous problems with various regulatory agen- 4.23 (1.007) Agree
cies
Inadequate training programs 4.20 (.857) Agree

11
Not only do pressure, rationalization, capability, Table 5. Descriptive Statistics of Internal Control
and opportunity seem to be the four factors that Measures
drive employee fraud in banks, the respondents
also agreed that when a bank’s corporate culture 1=Strongly disagree 5=Strongly agree
fosters team work and promotes respect for staff at Items Mean (Standard Corresponding
Deviation) scale category
all levels, the phenomenon of bank fraud can the
Control Environment
prevented (see Table 4).
Board of governors indepen- 4.73 (.529) Agree
dent of management
Table 4. Descriptive Statistics of Corporate Culture Appropriate measures are 4.57 (.834) Agree
taken to correct misfeasance
Impact on Fraud Prevention
Bank has an objective, in- 4.56 (.589) Agree
dependent and active audit
1=Strongly disagree 5=Strongly committee
agree Management acts with great 4.54 (.641) Agree
Items Mean (Standard Correspond- integrity
Deviation) ing scale cate- Ethical values upheld in all 4.51 (.670) Agree
gory management decisions
The bank values the idea 4.69 (.535) Agree Management committed to 4.45 (.661) Agree
of workers at every level operation systems
Risk Assessment
Supervisors delegate re- 4.54 (.745) Agree Management has criteria for 4.62 (.705) Agree
sponsibility ascertaining fraud-related
People I work with con- 4.54 (.682) Agree risks to the bank
structively confront Management has defined ap- 4.49 (.676) Agree
problems propriate objectives for the
bank
The bank fosters team 4.47 (.739) Agree
work Control Activities

Ignorance of core values 4.46 (.590) Agree Corrective action is taken to 4.51 (.635) Agree
address weakness
leads to trouble
Bank has a well-developed 4.41 (.676) Agree
Existence of clear mis- 4.44 (.719) Agree chart for accounting
sion that gives meaning
Staff are trained to imple- 4.40 (.726) Agree
and direction to work
ment the accounting and fi-
Everyone takes part in 4.43 (.686) Agree nancial management system
discussion at meetings Monitoring
The bank motives staff to 4.39 (.667) Agree On-going independent pro- 4.44 (.773) Agree
put out their best cess checks and evaluations
of control activities
The bank treats people 4.38 (.743) Agree
in a consistent and fair
manner Multivariate Multiple Regression of Drivers of
The bank respects its 4.38 (.730) Agree Fraud
workers
From the literature reviewed it was anticipated that
In Table 5, descriptive statistics of internal control all the factors/predictors of the study would pos-
is presented to indicate the extent at which internal itively be related to fraud. This was however not
control measures such as control environment, risk the case, as shown in Table 6, opportunity (-0.232)
assessment, control activities and motivation relate turned out to be negatively related to fraud com-
to employee fraud. From the analysis of the results, mittal. The co-efficient for internal control, which
the respondents agree with the fact that control was the factor with the highest B coefficient was
environment, risk assessment, control activities, 0.427. This means that for every unit increase in
and monitoring are essential tools in implementing internal control, a 0.43 unit increase in fraud is
internal control to prevent employee fraud. predicted, holding all other variables constant.
Using an alpha of 0.05; the coefficient for Internal
Control (0.427), is significantly different from 0
because its p-value is 0.000, which is smaller than
0.05.

12
Table 6. Simultaneous Multiple Regression Analysis of Ghana. The results of the multiple regression
Summary for Factors that Drive Bank Fraud analysis revealed that a significant relationship be-
tween internal controls and fraud exists. This im-
Variable B SEB Beta T Sig.
plies that internal controls of banks are a criterion
Pressure 0.012 0.046 0.020 .266 0.790 variable to consider when the issue of bank fraud
Rationaliza- 0.001 0.048 0.002 .023 0.982 comes to mind. A unit change in internal control
tion (as measured by scores of the internal control
Capability 0.085 0.043 0.159 1.984 0.049*
scale) leads to a 0.43 change in fraud (as measured
Opportunity -0.232 0.108 -0.216 -2.153 0.032* by scores of the fraud scale).
C o r p o r a t e 0.086 0.102 0.073 0.844 0.399
Culture Discussions and Conclusion
Internal Con- 0.427 0.094 0.347 4.570 0.000***
trol The article attempts to study the factors that impact
Constant 2.650 .408 6.489 .000 on bank employee fraud in Ghana. Based on this
objective, the study the researchers hypothesized
that the drivers of employee fraud (opportunity, ca-
Note; R2 = .363; F (6, 223) = 5.497 pacity, rationalization and pressure) are positively
*p < 0.05, ***p < 0.001 related to employee fraud in the banking sector of
Ghana; ineffective corporate culture is positively
The standard multiple regression model containing related to employee fraud in the banking sector of
the six independent variables (pressure, rational- Ghana; ineffective internal controls is positively
ization, capability, opportunity, corporate culture related to employee fraud in the banking sector
and internal control) was statistically significant, F of Ghana. The findings of this study indicate that
(6, 223) = 5.497, p = 0.000, indicating that the fac- bank fraud is prevalent in the Ghanaian banking
tors put together significantly predict bank fraud. sector and it is considered as an act that is commit-
The first set of hypothesis (H1a, H1b, H1c, H1d) of ted by both managerial and non-managerial staff
the study predicted a significant positive relation- with factors such as capability, opportunity and
ship between drivers of employee fraud (oppor- internal controls being the main drivers.
tunity, capacity, rationalization and pressure) and Being consistent with the findings of Elliot and
employee fraud in the banking sector of Ghana. Willingham (1980), the findings of this study re-
The results of the regression analysis however vealed that fraud is a prevalent phenomenon in the
revealed that only capability and opportunity sig- Ghanaian banking sector and is committed by bank
nificantly related to employee fraud. Pressure and staff in both managerial and non-managerial posi-
rationalization were not significantly related to em- tions, though it is more prevalent among non-man-
ployee fraud in the banking sector. The first set of agerial staff. The types of bank fraud committed
hypothesis is therefore partially supported. were mostly insider ones, which according to
The second hypothesis of the study predicted a Beck, Demirgüç-Kunt and Levine (2006) is preva-
positive relationship between corporate culture lent, difficult to detect and requires great effort and
and employee fraud in the banking sector of Gha- resources to minimize or to discover and prevent.
na. The results of the multiple regression analysis The respondents perceived that kick-backs, ex-
revealed that a non-significant relationship exists pense account fraud, property fraud, false benefit
between corporate culture and fraud. A unit change claims, theft of cash, and padding, all constitute in-
in corporate culture did not result in a unit change sider fraud. Just like one finds in Cressey’s (1986)
in fraud as seen from the B coefficient (0.09) of fraud triangle and Wolfe and Hermanson’s (2004)
capability in Table 1. The second hypothesis of the fraud diamond model, factors such as pressure,
study is therefore not supported. rationalization, capability and opportunity were
agreed upon by respondents to have a great poten-
This third hypothesis of the study predicted a sig- tial of leading bank staff to commit fraud.
nificant relationship between internal controls of
banks and employee fraud in the banking sector

13
While extant literature shows that the corporate that management should look beyond internal and
culture of the banking institutions within which external factors without compromising on enforc-
employees work could either promote good or in- ing the existing policy guidelines and internal con-
appropriate behaviour such as fraud, the findings trol measures instituted to deal with fraud. Manag-
of this study further revealed that when banks’ ers should also periodically rotate staff as this will
corporate culture fosters team work and promotes serve as a check on what each staff member does.
respect for staff at all levels, the phenomenon of If managers allow poor corporate and ineffective
bank fraud can the prevented. This is because cor- internal control to exist, it will encourage high
porate culture was found to have a significant rela- employee fraud.
tionship with employee fraud in the banking sector
(a finding which provided support to the third a Occasionally employees should be educated and
priori hypothesis and leads to the conclusion that reminded through their staff meetings on the con-
corporate culture’s role in combating employee sequences of committing fraud. Simultaneously,
fraud should be considered by management in their management should also ensure better working
quest to curb the phenomenon). This means that conditions of service (adequate remuneration) are
when banks have poor corporate culture, employee provided for staff, especially for those at non-man-
fraud could be high. agerial levels. Whistleblowing should therefore
be an act that is encouraged by managers for both
The study findings are consistent with that of Ewa bank staff and customers alike who repose much
and Udoayang (2012) who found that internal con- trust and confidence in each other to exercise some
trol design influences staff attitude towards fraud caution as the trust could provide the needed op-
in Nigerian banks such that a strong internal con- portunity to commit fraud.
trol mechanism is a deterrence to staff fraud while
a weak or ineffective one exposes the system to For future research, replication of the study is
fraud and creates opportunity for staff to commit encouraged. Beyond mere replication however,
fraud. This, therefore implies that Ghanaian the results of the study are encouraging for use by
banks with ineffective internal control will wit- practitioners. Also it is recommended that future
ness high employee fraud. From the findings it studies adopt a longitudinal design, unlike the
was revealed that when the board of governors’ cross-sectional one which was employed in the
activities and meetings are independent, appropri- present study. A longitudinal design would permit
ate measures are taken to correct misfeasance and inferences regarding causation.
when banks have an objective, independent and
active audit committee, the incidence of fraud is
checked.

Implications of the Study

This study on employee fraud in the banking sector

contributes to the literature on risk management.
The relationship between drivers of fraud and em-
ployee fraud has been explored to determine their
relationships and impacts in the banking sector.
Considering the fact that this study has shown that
factors such as capability, opportunity, corporate
culture and internal controls are drivers of fraud, it
is also important to note that there are other factors
that have not been studied in this article that may
also contribute to employee fraud.

Therefore, in order to ensure that fraud is mini-

mized in the banking sector, it is right to indicate
14
 Atuahene-Gima, K., & Li, H. (2002). When does
The Authors trust matter? Antecedents and contingent
effects of supervisee trust on performance
Ekow Nyarko Dadzie-Dennis, D.B.A. in selling new products in China and the
United States. Journal of Marketing, 66(3),
Nobel International Business School
61-81.
[email protected]
Atwood, C. C. P., & Elliott-Sinnock, J.
Livingstone Caesar, Ph.D. (2012). U.S. Patent No. 8,225,395. Wash-
Assistant Professor of Management ington, DC: U.S. Patent and Trademark
and Organisational Behaviour Office.
Nobel International Business School
Awuge, J., Obeyaa Anarfi, N., Ampiah Asane, V.,
[email protected] Urbanus Ndago, J., & Asiniembisa Ado-
chim, D. (2013). An Assessment of Fraud
Kyeame Ghansah, M.Sc. and Its Management in a Rural Banking
Senior. Research Fellow Industry (Doctoral dissertation). Chris-
Nobel International Business School tian Service University College. Kumasi,
[email protected] Ghana. Retrieved from http://ir.csuc.edu.
gh:8080/xmlui/handle/123456789/209
Jonathan Tetteh Korletey M.A.
Ayagre, P., Appiah-Gyamerah, I., & Nartey, J.
Research Fellow (2014). The effectiveness of internal control
Nobel International Business School systems of banks. The case of Ghanaian
[email protected] banks. International Journal of Accounting
and Financial Reporting, 4(2), 377.
Beck, T., Demirgüç-Kunt, A., & Levine, R.
References (2006). Bank supervision and corruption
in lending. Journal of Monetary Econom-
Ahmad, A., Bosua, R., & Scheepers, R. (2014). ics, 53(8), 2131-2163.
Protecting organizational competitive
advantage: A knowledge leakage perspec- Bank for International Settlements (BIS) (1998).
tive. Computers & Security, 42, 27-39. International convergence of capital mea-
surement and capital standards.(Publi-
Akinyomi, O. J. (2012). Examination of fraud in cation No. bcbsc111). Basel Committee
the Nigerian banking sector and its preven- on Banking Supervision. Retrieved from:
tion. Asian Journal of Management Re- www.bis.org
search, 3(1), 182-194.
Cressey, D. R. (1986). Why managers commit
Albrecht, W. S., Albrecht, C. C., & Albrecht, C. fraud. Australian & New Zealand Journal
O. (2006). Fraud Examination. New York, of Criminology, 19(4), 195-209.
NY: Thomson.
Deloitte. (2005). Technology Media and Telecom-
Amudo, A., & Inanga, E. L. (2009). Evaluation of munication Trends: Predictions, 2005: A
internal control systems: A case study from focus on the media sector. Paul Lee (Ed),
Uganda. International Research Journal of Deloitte Touche Tohmatsu Consulting,
Finance and Economics, 27(1), 124-144. United-States, The Netherlands, Hong-
Kong. Retrieved from https://industrias-
Anyanwu, J. C. (1993). Monetary economics: The- decontenido.files.wordpress.com/2010/08/
ory, policy, and institutions. Onitsha, Nige- deloitte-tendencias-medios-ww-2005.pdf
ria: Hybrid Publishers. on 27/08/2017.

Ashforth, B. E., & Anand, V. (2003). The normal-

ization of corruption in organizations. Re-
search in Organizational Behavior, 25,
1-52.
15
Elliott, R. K., & Willingham, J. J. (1980). Manage- Manz, C. C., Anand, V., Joshi, M., & Manz, K. P.
ment fraud; Detection and deterrence. New (2008). Emerging paradoxes in executive
York, NY: Petrocelli Books. leadership: A theoretical interpretation
of the tensions between corruption and
Ewa, E. U., & Udoayang, J. O. (2012). The impact virtuous values. The Leadership Quarter-
of internal control design on banks ability ly, 19(3), 385-392.
to investigate staff fraud, and life style and
fraud detection in Nigeria. International Nwankwo, G. O. (1991). Bank management: Prin-
Journal of Research in Economics & Social ciples and practice. Lagos, Nigeria: Malt-
Sciences, 2(2), 32-43. house Press Limited. Google Scholar.

Humphreys, E. (2008). Information security man- Oseni, E. (2006). Across the counter frauds in the
agement standards: Compliance, gover- banking industry and evaluation of some
nance and risk management. Information of the available controls. The Nigerian Ac-
Security Technical Report, 13(4), 247-255. countant, January/March.

Hillison, W., Pacini, C., & Sinason, D. (1999). The Pallant, J. (2011). SPSS Survival manual: A step-
internal auditor as fraud-buster. Managerial by-step guide to data analysis using SPSS
Auditing Journal, 14(7), 351-363. version 18.(4th ed.). Maidenhead, Berk-
shire, UK: Open University Press.
Hofstede, G., Garibaldi de Hilal, A. V., Malvezzi,
S., Tanure, B., & Vinken, H. (2010). Com- Pfeffer, J. (1995). Producing sustainable competi-
paring regional cultures within a country: tive advantage through the effective man-
Lessons from Brazil. Journal of Cross-Cul- agement of people. Academy of Manage-
tural Psychology, 41(3), 336-352. ment Executive, 9 (1), 55-69.

Hollinger, R. C., & Clark, J. P. (1983). Deterrence Pedneault, S., Silverstone, H., Rudewicz, F., &
in the workplace: Perceived certainty, per- Sheetz, M. (2012). Forensic accounting
ceived severity, and employee theft. Social and fraud investigation for non-experts.
Forces, 62(2), 398-418. Hoboken, NJ: John Wiley & Sons.

Hooper, M. J. & Pornelli, C. M. (2010) Deterring Samociuk, M., Iyer, N., & Doody, H. (2010). Short
and detecting financial fraud: A platform guide fraud risk: Fraud corruption resis-
for action. Retrieved from: http://www. tance and detection. Farnham, UK: Rout-
thecaq.org/docs/reports-and-publications/ ledge
deterring-and-detecting financial-report-
ing-fraud-a-platform-for-action.pdf? Schein, E. H. (1990). Organizational culture: What
it is and how to change it. In Y. Doz, P. Ev-
Kaiser, H. F. (1974). An index of factorial simplici- ans & A. Laurent (Eds.) Human Resource
ty. Psychometrika, 39(1), 31-36. Management in International Firms (pp.
56-82). London: Palgrave Macmillan.
Kassem, R., & Higson, A. (2012). The new fraud
triangle model. Journal of Emerging Trends Silverstone, H., & Davia, H. R. (2005). Fraud 101:
In Economics and management Sciences(- Techniques and strategies for detection.
JETEMS), 3(3), 191-195. Hoboken, NJ: John Wiley & Sons.

Kingsley, E. (2012, January). Predictive asset Smeets, B. J. M., Poon, K. F., & Bodensjo, M.
management. In SPE Intelligent Energy (2006). U.S. Patent No. 7,058,806. Wash-
International 2012, 2, 783-790. Society of ington, DC: U.S. Patent and Trademark
Petroleum Engineers. Texas, USA: Rich- Office.
ardson.
Tchankova, L. (2002). Risk identification–basic
Lister, L. M. (2007). A practical approach to fraud stage in risk management. Environmental
risk: Comprehensive risk assessments can Management and Health, 13(3), 290-297.
enable auditors to focus antifraud efforts on
areas where their organization is most vul-
nerable. Internal auditor, 64(6), 61-66.

16
Wells, J. T. (2004). New approaches to fraud deter-
rence. Journal of Accountancy, 197(2), 72.
Wells, J. T. (2005). Principles of fraud examina-
tion. New Jersey: John Wily & Sons.
Wilson, D. (2005). Fraud and technology crimes:
Findings from the 2002/03 British Crime
Survey and the 2003 Offending, Crime and
Justice Survey. London: Home Office.
Wolfe, D. T., & Hermanson, D. R. (2004). The
fraud diamond: Considering the four ele-
ments of fraud. The CPA Journal, 74(12),
38.

17