An analysis of external anti-fraud initiatives in the domestic banking sector

Abstract

The collapse of financial institutions has not been a recent discovery but has been going on for many years. Studies show that fraudulent activities have been the biggest factor contributing to the insolvency of a bank. Over the years, one has seen many large institutions which led to bankruptcy, for example Barings Bank, Enron, Wells Fargo, and many more. There are many causes which may lead to fraud in banking, mainly when there is a lack of transparency, poor management information, not having an independent internal audit department, and lastly, a lack of leadership from higher management amongst many others. Why mention banks? This is because they are the ones most prone to risk as they are the perfect point of entry for criminals to be able to get to people’s information and money. Risk management was not a recognised sector back in the years. Post the 2008 global financial crisis, the concept of risk management became the ultimate innovative sector which banks started to take a closer look at. A risk is alive; it may be born, it may change, and risk managers came up with frameworks to consistently keep up to date with banking regulations that are imposed by the European Banking Authority. Essentially, these laws and directives are to be implemented by European banks in accordance with the jurisdiction of the concerned country and adapted according to the legislation of the country. With regards to this dissertation the researcher concluded that in Malta external fraud is taken quite seriously although there is room for improvement. It seems that the major issue is identified with fraud which impacts one or few customers. Any major external fraud is usually identified immediately by the banks due to their internal systems. However, more awareness among the public is deemed as very important to make customers more knowledgeable about the topic.