ASSESSMENT OF FRAUD CONTROL PRACTICE: A CASE STUDY OF DASHEN BANK S.C, ADDIS ABABA BRANCHES

Abstract

Ethiopia, recently the banking industry has grown fast at the same time different problems related to fraud and other criminal cases have increased in the bank sector. Internal control plays a key role to detect fraudulent activities and to overcome the different fraud problems. This study focused on assessment of fraud control practice in the case of Dashen Bank. The research has applied descriptive statistics by using questionnaires and document review. To undertake the research simple random sampling is used to select respondents from branches and purposive type of sampling was used to select 27 branches out of 109 branches found in Addis Ababa. 185 questionnaires were distributed in which 183 of them returned. Data were analyzed using descriptive statistics using SPSS software. The result indicates that there are fraud cases but the rate is low and internal control in the bank is not effective. There is a deficiency in controlling component mainly the risk assessment and information and communication component. Comparing to risk and information communication control environment, control activities and monitoring practice are good. Employees do not have adequate awareness about anti-fraud policy, and the controlling mechanisms used by the bank are not enough to prevent fraudulent activities. The findings show that the bank does not use job rotation, there is lack of segregation of duties, most branches and ATM stations have not security camera, and customers’ information is not updated. Generally the outcome of the research confirmed that the fraud control practice of Dashen Bank S.C. has problems and weaknesses that need to be improved. In view of these deficiencies, major recommendations proposed include bank should apply strong controlling mechanism such as, UV light, forged cheque, foreign and local cash detection machine, upgrade customer information, install security camera in ATM stations and branches, management should control dormant accounts separately, HR should verify new employees background, there should be segregation of duty and responsibility and periodic job rotation, enhance awareness of all employees about anti-fraud policy and control procedures and effectively implement control components to prevent fraud cases.