Examination of fraud in the Ugandan banking sector and its prevention: a case study of Post Bank Uganda Limited

Abstract

Bank fraud, defalcation and forgeries have unprecedented prepositions and dimensions in the banking industry. A report of the Uganda Bankers Association indicates that albeit the good performance of the financial system in supporting the economy through intermediation and operation of the payment system, the financial sector faces the problem of bank fraud which unfortunately is on the increase. Bank frauds take various forms ranging from alteration of cheques and / or counterfeit to skimming or cloning of cards. To combat bank fraud, a number of laws were enacted in Uganda but still fraud is at an increasing rate amid these existing laws. The study objectives included; finding out the types of bank fraud experienced in the commer-cial banks in Uganda, as well as strategies to prevent fraud. The study was a doctrinal and cross-sectional. The study employed both qualitative and quantitative approaches. Findings on the types of bank fraud experienced in the commercial banks in Uganda indicate, online fraud wiring of money from accounts, ATM fraud, forged cheque fraud, loan fraud among others. The major factors leading to increased bank fraud included inadequate training on prevention of bank fraud, failure in management supervision, inadequate staff to carry out work banking operations meticulously, poor physical controls, lack of segregation of duties, lack of oversight by management on deviations from existing processes, business pressures to meet unreasonable targets, lack of tools to identify potential red flags are factors responsible for increased fraud. There is need for continuous training of employee and customer education on bank fraud, re-view of the fraud detection mechanisms to be able to quickly detect fraud and harsh penalties should be imposed on those who are found guilty of the fraud to deter others who would be in-tending to do the same.