Risk Assessment and Fraud Prevention in Banking Sector

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Abstract

The objective of the study was to assess the effect of risk assessment on fraud prevention in banking industry in Kenya. The study involved all banks in Kenya. Descriptive and correlational research designs were used in this study. Factor analysis was undertaken to reduce the factors and remain with factors that had higher loading which was determined through the use of Eigen values. Correlation analysis was applied to determine the strength and direction of relationship between variables and regression analysis based on structural equation modelling (SEM) was used to test the hypothesis. The descriptive analysis showed that the respondents strongly agreed that the parameters put in place are capable of preventing fraud in banks. The hypothesis testing showed that risk assessment has significant effect on fraud prevention in banking industry in Kenya. From the results of tests, it was concluded that the risk assessment mechanisms put in place to assess the risks have significant effect in fraud prevention and as such they should be enhanced to completely prevent fraud in banking sector. Keywords: Risk assessment; Banking sector; Fraud prevention; Kenya.

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Risk Assessment and Fraud Prevention in Banking Sector

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