Bindura University of Science Education Faculty Of

BINDURA UNIVERSITY OF SCIENCE EDUCATION

FACULTY OF COMMERCE

DEPARTMENT OF INTELLIGENCE AND SECURITY STUDIES

THE IMPACT OF WHITE COLLAR CRIMES ON ZIMBABWEAN COMMERCIAL BANKS. A SURVEY OF HARARE CENTRAL BUSINESS DISTRICT.

MONALISA TAHUWONA

B1025613

A DISSERTATION SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE BACHELOR OF COMMERCE (HONOURS) DEGREE IN FINANCIAL INTELLIGENCE (BCOM. F.I) OF BINDURA UNIVERSITY OF SCIENCE EDUCATION.

FEBRUARY 2017

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DESSERTATION TITLE : THE IMPACT OF WHITE COLLAR CRIMES ON ZIMBABWEAN COMMERCIAL BANKS. A SURVEY OF HARARE CENTRAL BUSINESS DISTRICT.

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DISSERTATION TITLE: THE IMPACT OF WHITE COLLAR CRIMES ON ZIMBABWEAN COMMERCIAL BANKS: A SURVEY OF HARARE CENTRAL BUSINESS DISTRICT.

DEGREE TITLE: Bachelor of Commerce (Honours) Degree in Financial Intelligence.

Permission is hereby granted to the Bindura University of Science Education Library to produce single copies of this dissertation for private, scholarly or scientific research purposes only. The author reserves other publication rights and the dissertation nor may extensive extracts from it be printed or otherwise reproduced without the author’s written permission.

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PERMAMENT ADDRESS: 83 Selous Avenue SHAMVA ZIMBABWE

DATE: 28 February 2017

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DEDICATION

I would like to dedicate this dissertation to my father and my son Brandon. May the Lord bless you.

ABSTRACT

White collar crimes have been a cause of concern in the different business sectors inclusive of the financial institutions. Financial institutions, particularly banks have been affected by different types of white collar crimes. The aim of this study was to investigate the impacts of white collar crimes on commercial banks. It also looked at the prevalence of white collar crimes in commercial banks. Furthermore, it looked at ways to combat white collar crimes in commercial banks. The research was conducted in the central business district of Harare Zimbabwe. A descriptive survey research design was used alongside qualitative data collection techniques. A sample of 32 respondents, (24 questionnaires and 8 interviews) were invited to participate through stratified random sampling and purposive sampling. The study revealed money laundering, cheque fraud, electronic card fraud, fraudulent RTGS transactions to be amongst the types of cybercrime in banks. Embezzlement was viewed to be the most prevalent crime in commercial banks. The study also observed that corruption was at its peak in the Zimbabwean commercial banks. Impacts of white collar crimes that were noted included; jeopardizing bank reputation, diminishing profits, demotivating staff, eroding capital, collapsing banks and causing loss of customers. Measures that were highlighted include; need for effective internal controls measures, whistleblowing, ethics training anti-money laundering campaigns and external/forensic audits so as to reduce its impacts of white collar crimes. The researcher recommended that there must be effective internal controls and forensic audits internal audits and external audits must be carried out. In addition whistle blowing at the work place was also encouraged.

ACKNOWLEDGEMENT

The research could not have been successful without the professional counsel of my research supervisor Dr Mugari. I also wish to acknowledge my family for their unwavering financial and moral support and encouragement.

Table of Contents APPROVAL FORM ...... ii DEDICATION...... iv ABSTRACT ...... v LIST OF FIGURES ...... xii

CHAPTER I ...... 1 INTRODUCTION ...... 1 1.0 Introduction ...... 1 1.1Background of the study ...... 1 1.2 Statement of the problem ...... 3 1.3 Aim of the study ...... 4 1.4 Objectives of the Study ...... 4 1.5 Research questions ...... 4 1.6 Assumptions ...... 4 1.7 Significance of the study ...... 5 1.7.1 To Commercial banks ...... 5 1.7.2 To the student and other scholars ...... 5 1.7.3 To the University ...... 5 1.8 Delimitations ...... 5 1.9 Limitations ...... 6 1.10 Organization of study ...... 6

CHAPTER II ...... 7 LITERATURE REVIEW ...... 7 2.0 Introduction ...... 7 2.1 Conceptual framework ...... 7 2.1.1 White collar crime ...... 7 2.1.2 Nature of white collar crimes in commercial banks ...... 8 2.1.2.1Fraud ...... 8 2.1.2.2 Cheque Fraud ...... 9

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2.1.2.3 Electronic card fraud ...... 10 2.1.2.4 Fraudulent RTGS transactions ...... 10 2.1.2.5 Money laundering ...... 10 2.1.2.6 Embezzlement ...... 11 2.1.3 Impacts of white collar crimes in commercial banks ...... 11 2.1.4 Combating white-collar crime ...... 13 2.1.4.1 Strengthening Internal Controls ...... 13 2.1.4.2 Severe criminal and civil penalties ...... 13 2.1.4.3 Whistle blowers ...... 13 2.1.4.4 Ethics...... 14 2.1.4.5 Employee background screening ...... 14 2.1.4.6 Cooperation with prosecution efforts...... 15 2.1.4.7 Internal audit/internal investigative units...... 15 2.1.4.8 Segregation of duties...... 15 2.1.4.9 Modest Remuneration ...... 16 2.2 Theoretical framework ...... 16 2.2.1 Anomie Theory ...... 16 2.2.3 General strain theory ...... 17 2.2.4 Institutional anomie theory ...... 17 2.2.5 Fraud triangle theory ...... 18 2.2.6 Rational choice theory ...... 19 2.2.7 Social learning Theory ...... 19 2.3 Empirical evidence ...... 20 2.4 Gap analysis ...... 26 2.5 Chapter summary ...... 26

CHAPTER III ...... 27 RESEARCH METHODOLOGY ...... 28 3.0 Introduction ...... 28 3.1 Research Design ...... 28 3.1.2 Justification of descriptive survey research design ...... 28

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3.2 Research Population ...... 29 3.3 Population sample ...... 29 3.4 Sampling techniques ...... 30 3.4.1 Purposive sampling ...... 30 3.4.2 Stratified sampling method ...... 30 3.5 Research Instruments ...... 31 3.5.1 Questionnaires ...... 31 3.5.2 Strengths of questionnaires ...... 31 3.5.3 Limitations of use of questionnaires ...... 31 3.6 Interviews ...... 31 3.6.1 Advantages of interviews ...... 32 3.6.2 Disadvantages of personal interviews ...... 32 3.7 Data collection procedures ...... 32 3.7.1 Pilot Study ...... 32 3.7.2 Questionnaire Distribution ...... 33 3.7.3 How interviews were conducted ...... 33 3.8 Data validity and reliability...... 33 3.9 Data presentation and analysis ...... 34 4.0 Chapter Summary ...... 34

CHAPTER IV...... 35 DATA PRESENTATION AND ANALYSIS ...... 35 4.0 Introduction ...... 35 4.1 Analysis of Data Response Rates...... 35 4.1.1 Questionnaire Response Rate ...... 35 4.1.2 Interview response rate ...... 36 4.3.1 Gender ...... 36 4.3.3 Respondents’ Length of Service ...... 38 4.3.4 Job title ...... 38 4.3 Prevalence of white collar crimes ...... 39 4.5 Impacts of white collar crimes in commercial banks...... 42

4.5.1 Jeopardize bank reputation...... 43 4.5.2 Diminishes profits ...... 44 4.5.4 Erodes capital ...... 46 4.5.5 Collapses banks ...... 47 4.5.6 Loss of customers ...... 48 4.6 Ways to reduce white collar crimes ...... 48 4.7 Summary ...... 50

CHAPTER V ...... 51 SUMMARY, RECOMMENDATION AND CONCLUSION ...... 51 5.0 Introduction ...... 51 5.1 Summary of the study ...... 51 5.2 Summary of findings ...... 51 5.4 Recommendations ...... 52 5.5 Suggestion for further research ...... 53 REFERENCES ...... 54 APPENDIX 1: Permission seeking letter ...... 59 APPENDIX 2: QUESTIONNARE ...... 60 APPENDIX 3: INTERVIEW GUIDE ...... 63

LIST OF TABLES

Table 4.1: Questionnaire respondents…………………………………………………...37

Table 4.2: Interview respondents………………………………………………………..38

Table 4.3: Prevalence of white collar crime……………………………………………..41

Table 4.4: Impacts of white collar crimes in commercial banks………………………...44

LIST OF FIGURES

Figure 1: Gender of respondents………………………………………………………………..39

Figure 2: Respondents’ academic qualifications……………...…………………………………39

Figure 3: Respondents’ length of service……………………………………………………….40

Figure 4: Respondents’ occupation……………………………………………………………..40

Figure 5: Response on whether white collar crimes jeopardize bank reputation……………….45

Figure 6: Response on whether white collar crimes diminish profits…………………………..45

Figure 7: Response on whether white collar crimes demotivate staff………………………….46

Figure 8: Response on whether white collar crimes erode capital………………………………47

Figure 9: Response on whether white collar crimes collapse of banks………………………….48

Figure 10: Response on whether white collar crimes cause loss of customers………………….48

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CHAPTER I

INTRODUCTION

1.0 Introduction This section gives a brief problem under study. It goes further to highlight the statement of the problem and research questions. The researcher looked at the significance of the study, limitations of the study and concludes with a summary of the chapter.

1.1Background of the study The world has been hit by a number of white collar crimes due to improper practices at some companies. Scandals have been rampant with the turn of the 21st century, especially during the recent global recession. The acts involve complex methods for misusing or misdirecting funds, overstating revenues, understating expenses, overstating the value of corporate assets or underreporting the existence of liabilities, sometimes with the connivance of officials in other corporations or affiliates. Global companies that were made to collapse, as a result of white collar crimes include Enron, WorldCom and Lehman brothers.

Ilter (2009) states that Lehman executives allegedly sold faulty assets and disguised loans as sales giving the illusion that they were richer than they actually were and had less in bad assets. As a result of the scandal, the Lehman Brothers went from the most admired securities firm according to Fortune Magazine to the company with the largest bankruptcy in U.S. history in 2008 (Mamudi 2008). The Enron scandal revealed in October 2001 eventually led to the bankruptcy of the Enron Corporation. Smith and Walter (2006) highlighted that Enron was cited as the biggest audit failure where a staff of executives was developed that, by the use of accounting loopholes and poor financial reporting were able to hide billions of dollars in debt from failed deals and projects. They did not only mislead Enron's board of directors and audit committee on high-risk accounting practices, but also pressured the auditors to ignore the issues.

Furthermore Zekany et al (2004) noted WorldCom’s executives were blamed for claiming $3.8billion in regular expenses as capital investment in 2001. This resulted in improper spreading of operating costs which inflated WorldCom's profits.

Among East African countries, Uganda recorded an increase in bank fraud cases. Speaking at the launch of the Deloitte 2013 Financial Crimes Survey report in Kampala, the director Forensic and Litigation Support Deloitte, stated that there had been an increase in cases of fraud in the region due to financial institutions’ failure to put in place high-tech controls that matched the kind of innovative products put on the market. According to the report, Uganda lost between $1 million and $10 million annually to fraud while Kenya and Tanzania was losing more than $10 million, each annually. Although cheques and cash used to be the most vulnerable channels used to defraud financial institutions, the report noted that Real Time Gross Settlement systems (RTGS) and Electronic Funds Transfer (EFT) fraud (wire fraud) are now emerging as vulnerable channels targeted by fraudsters.

Nigerian banks recorded 8,502 fraud cases costing N23.34bn in nine months (Business day June, 2015). Over the years, it was established that a substantial part of banks’ revenue was lost to fraud with no single bank spared. From the report on Frauds and Forgeries in Banks (January – September 2014), the reports were ranging from fraudulent ATM withdrawals, computer fraud, fraudulent withdrawals, suppression of entries and operating fraudulent accounts.

According to South African Banking Risk Information Centre report (2014), the banking industry announced that debit card fraud losses increased by 42% for the period 1 January- 30 September 2013. While the level of this crime was more sophisticated and complex than others, it was fast-becoming a means to siphon large amounts of money without getting caught or imprisoned. The report went on to state that a number of South Africa’s commercial banks had been heavily fined for collusion, but no prison term sentence was given to those at the core of the charges. Significant public outrage ensued due to failure of accountability.

Zimbabwe’s financial system suffered from fraudulent practices perpetrated by bank employees, people outside the banks, with several bank tellers accused of stealing thousands of dollars. Several banks’ employees have been dragged before the courts for various white collar crimes

including fraud and embezzlement. These cases have been on the rise since the introduction of the multiple currency system in 2009 (Moyo, 2014). Economic and social commentators highlighted that the prevailing economic challenges, characterized by a biting liquidity crunch, was forcing the respected bankers to turn rogue. Like millions of other Zimbabweans reeling mounting hardships of meeting expenses for their families, bankers were being hauled before the courts on embezzlement charges for stealing millions from their employers.

Former international banking officer with BancABC reportedly manipulated a client’s account and fleeced out more than $1 million through fraudulent bank transfers (Sibanda, 2014). (Mahakame, 2012) reported that a former Steward Bank employee was hauled before the courts after she allegedly enchased $37 418 that was to be deposited to their bank accounts through mobile money transfer by Agro-dealers. Earlier on, a trainee customer service officer with FBC Bank reportedly connived with a bank teller and swindled the Mines Ministry of more than $500 000. In January 2015, an alleged plot by a Stanbic Bank employee in Harare to defraud his employer of over $28 000 backfired after a routine inspection at the bank unearthed the scam, leading to his arrest. A former chief teller with the FBC was slapped with a five-year jail term for defrauding Zimpapers of over $30 000 in a well-organized scam dating back to September 2012(Gwanyanya, 2013). It is hence against this background that prompted the present researcher to carry out this study

1.2 Statement of the problem Despite innovations in the financial service sector the issue of white collar crime is still one of the major causes of bank failures in Zimbabwe. White collar crimes are often recorded in almost all branches of all banks, particularly commercial ones. These acts have hindered a lot of business opportunities. White collar criminals mainly use financial institutions like banks, insurance companies and many other designated institutions to conceal their illicit income. This leaves these institutions vulnerable and results in serious adverse effects to these various institutions. The effects of white collar crimes include; commercials banks incurring additional operating costs, losing customer trust and loyalty, facing legal obligations, and above all white collar crimes result in the funding of other traditional crimes like robbery and burglary that

destroy the financial institution and the economy as a whole. Benson e tal(2009) highlight that if white collar crimes are successful, it means that other crimes like terrorism are funded and other forms of organised crime. Multiplier effect of crime will eventually come into play and collapse all financial institutions due to failure of the economy as a whole. It is against this background that the research endeavors to analyze the impact of white collar crimes in commercial banks

1.3 Aim of the study This study sought to analyze the impacts of white collar crimes in commercial banks.

1.4 Objectives of the Study

 To identify the types of white collar crime on banks in Harare.  To highlight the impact of white collar crime on banks in Harare.  To explore ways of combating white collar crime on banks in Harare.

1.5 Research questions

 What are the types of white collar crime on the banking sector?  What are the impacts of white collar crime on banking sector?  What ways can the bank employ to combat white collar crime?

1.6 Assumptions During the course of the study the researcher assumed that:

 Respondents would provide factual data.  The methodology would be ethically accepted and the instruments to be used would be valid and reliable.  Commercial banks are facing problems in the prevention of white collar crimes.  Commercial banks’ operations are hampered by increases in white collar crimes.

1.7 Significance of the study

1.7.1 To Commercial banks Management at commercial banks can use the findings of this study to reduce white collar crimes and help the organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of the management internal control systems and governance processes.

1.7.2 To the student and other scholars Upon completing this research, the researcher will be in a position to better comprehend the concept of white collar crime and its impact in financial institutions, particularly in commercial banks. The study will also help scholars to appreciate and enhance their knowledge of white collar crimes so as to adhere to the professional ethics

1.7.3 To the University The study will help lecturers to have a deeper understanding on white collar crimes and its impact on financial institutions. By this study, they will come up with easier and powerful future programs. The research will also be of significance to Bindura University students as they can use it for literature review in their researches.

1.8 Delimitations This study limited itself to impacts of white collar crimes in banks only and only covered the period 2010 to 2014. Furthermore, the area under study was Harare ( Central Business District) CBD and commercial banks only were considered, hence what takes place in other areas and other banks was not be taken into consideration. Therefore the study did not exhaust the extent to which white collar crimes affected the whole financial sector. Further studies will be necessary to cover all financial institutions in Zimbabwe

1.9 Limitations The study acknowledges that the following limitations were encountered in conducting the research

 Access to internal company information was not possible due to confidentiality issues, to overcome this, the researcher guaranteed anonymity to individual participants through a written request providing solid assurance on the matters concerning confidentiality, showing intent to conduct research in a transparent manner.

 Being an attachment student was a constrain in the sense that what was revealed to the researcher by the management professionals was limited, however the researcher specified intended reasons for information gathered was for learning process and not for publication.  Not all sample members participated in the research thereby affecting the reliability and generalize ability of the findings.

1.10 Organization of study The research was divided into five chapters. The remainder of the paper is as follows: Chapter 2 focuses on literature review, which includes theoretical and empirical literature review. Under empirical literature review similar studies in different countries are highlighted. Chapter 3 gives a description of the research methodology. This chapter deals with how the research was conducted and gives justification for various steps taken. This also involves clarification of the steps taken towards data collection and data analysis. Chapter 4 covers data analysis and presentation of findings. Chapter 5 is a discussion of the results, recommendations and conclusions. Results are discussed in the context of what other similar researches quoted in literature review found. Suggestions for future research are also given.

CHAPTER II

LITERATURE REVIEW

2.0 Introduction This chapter looked into conceptual framework as well as empirical review in relation to the topic under study. Also covered in this chapter are different types of white collar crime that prevail in commercial banks and types of security systems in banks. Security measures that can be implemented to prevent white collar crime are also covered in this chapter. In addition, this chapter identifies the gap between previous studies and the current study.

2.1 Conceptual framework

2.1.1 White collar crime The term white collar crime was first used in 1939 during an address delivered by Professor Edwin Sutherland of Indiana University to the American Sociological Society. Sutherland sought to expand the definition of crime beyond the generally held belief that crime was an activity, often violent, perpetrated by members of the socio-economic under class. Sutherland(1949) felt that viewing crime from this old perspective ignored the fact that "persons of the upper socio- economic class engage in much criminal behavior; that this behavior differs from the criminal behavior of the lower socio-economic classes principally in the administrative procedures used in dealing with the offenders. To Sutherland white-collar crime is a crime committed by: "a person of respectability and high social status in the course of his occupation."

Geis (2000) states that white collar crimes are committed by individuals ranging from company clerks to CEOs of multinational corporations as well as people working on their own to rob private citizens. Furthermore Gibson and Wright (2001) assert that white collar crimes can also be perpetrated by corporations, through the actions of individuals or groups of employees. More often than not, however, corporations are the targets of white collar criminals, rather than the perpetrators of crimes. These crimes can result in monetary losses of a few cents to tens of millions of dollars, depending on their complexity and the expertise and intentions of the perpetrators. Glasbeek(2001) says these crimes can be committed by employees seeking only to embezzle a "few dollars" to executives siphoning off corporate funds under the guise of outlandish salaries.

Hansen (2009) highlights that the Federal Bureau of Investigation (FBI), used an offense-based perspective to define white-collar crime as part of its Uniform Crime Reporting program. The FBI defines white-collar crime as “Those illegal acts which are characterized by deceit, concealment, or violation of trust and which are not dependent upon the application or threat of physical force or violence”. Individuals and organizations commit these acts to obtain money, property, or services to avoid payment or loss of money or services or to secure personal or business advantage.

2.1.2 Nature of white collar crimes in commercial banks

2.1.2.1Fraud Hansen (1990) defines fraud as an intentional perversion of truth for the purpose of inducing another, relying upon it to part with some valuable thing belonging to him or to surrender a legal right. It is also a false representation by words or by conduct, by false or misleading allegation or by concealment of that which deceives and is intended to deceive. It is an economic crime that involves some kind of trickery, swindle or deceit. Cressey(1995) propagates that fraud is anything calculated to deceive, whether by a single act or combination or by suppression of truth or suggestion of what is false whether it be by direct falsehood, by speech or silence, word of mouth, look or gesture. According to Wells (2007) anti-fraud professionals agree that fraud encompasses activities involving dishonesty and deception that can drain value from a business,

either directly or indirectly, whether or not the perpetrators benefit. Fraud involves the intent to defraud that is, the perpetrator relies on his or her deception to accomplish or hide the fraudulent activity. Fraud is not accomplished via honest mistake or error.

2.1.2.2 Cheque Fraud Cheque fraud is the tempering of cheques in acquiring funds that are not legally owned. Wells (2007) identified cheque tempering methods as (1) forged maker schemes, (2) forged endorsement, (3) concealed cheque schemes, (4) authorised maker schemes as methods of commiting cheque fraud.

Forged maker scheme

This is a cheque tempering scheme in which an employee misappropriates a cheque and fraudulenty affixes the signature of an authourised maker thereon. The schemes are commited by employees who lack signatory authourity on company acoounts. Inorder to forge a cheque employees must be able to have access to a blank cheque, must be able to produce a convincing forgery of an authorised signature, and must be able to conceal a crime (Wells, 2007).

Forged endorsement scheme

In this scheme an employee intercepts a compmany’s cheque intended for a third party and converts the cheque by signing the third party’s name on the endorsement line in the cheque. In some instances the fraudster signs his name as the second endoser. The key to this scheme is obtaining cheques before they are actually delivered (Wells, 2007).

Concealed cheque schemes

An employee prepares fraudulent cheques and submits them usually along with legitimate cheques to an authorized maker who signs it without a proper review. The perpetrator is usually a person responsible for preparing cheques. A cheque is prepared in favour of him, an accomplice or fictitious person. Instead of forging a signature of the authorized maker, the fraudster conceals the check in between a stuck of cheques waiting to be authorized. The cheques are then signed without adequate review (Wells, 2007).

Authorized maker schemes

This is a type of cheque tempering fraud in which employees with signature authority on a company account write fraudulent cheques for their own benefit and sign their own name as the maker (Wells, 2007).This is by far the commonest method by which the customers and the bank are defrauded. They occur mainly in company accounts and are invariably perpetrated by staffs within the company who have access to the company’s cheque book

2.1.2.3 Electronic card fraud Electronic cards frauds are synonymously referred to as credit card fraud or debit card fraud. These are used as a fraudulent source of funds in a transaction. Gottschalk (2010) defines electronic fraud as a crime whereby credit or debit cards are reproduced inorder to use the credit balance to obtain financial advantage.This creation of a duplicate card occurs when the information contained on the magnetic strip is reproduced. It also occurs when a card is lost or stolen and used by a third party to buy goods with these cards and to move cash from the cards.

2.1.2.4 Fraudulent RTGS transactions Ilter (2009) states that “RTGS” stands for Real Time Gross Settlement and it is a funds transfer mechanism where transfer of money takes place from one bank to another on a “real time” and on “gross” basis. This is the fastest possible money transfer system through the banking channel. The RTGS system involves many security features that require initiation of payment only after the customer gives a written request. To bypass this requirement the fraudsters break into the bank’s online security apparatus and transfer money from different accounts through RTGS. The money will be immediately withdrawn from those accounts through credit cards and other means.

2.1.2.5 Money laundering

Money laundering refers to the intentional concealment of sources of money, typically money acquired from crime, and making it appear that it came from legitimate sources. Tuner (2011) defines money laundering as the process by which criminals try to conceal the true origins of the proceeds of crime. Money is laundered through financial institutions taking the advantage of indivisible nature of money when it is mixed with lawful money. Money laundering is achieved

by several methods including breaking up large amounts of cash into small deposits that escape scrutiny, then purchasing bearer instruments, also in small denominations; investing in cash- intensive businesses; transferring funds to trusts and shell companies; buying a controlling interest in a bank; spending money at a casino or other gambling and cashing in chips; purchasing real estate with dirty money and then selling the property; creating fictitious employees and fictitious loans.

2.1.2.6 Embezzlement

According to Williams, (1997), embezzlement is the fraudulent appropriation of property by a person to whom it may be entrusted or to whose hands it has lawfully come. It is a type of larceny and the term is applicable to cases of fraudulent appropriation by clerks, servants or carriers of property coming into control by virtue of their employment. It can be accomplished by falsifying records, accounts and ledgers; creating phantom employees; and writing phony cheques.

2.1.3 Impacts of white collar crimes in commercial banks White collar crimes in any system have lots of consequences that bear directly on the system and indirectly the environment. The effects of white collar crimes in the banking industry are felt by all. The effect of fraud in banks has a chain reaction on the economy as a whole. The impact of fraudulent activities on banks is felt in the area of capital base depletion of the bank. Kane and Wall (2006) highlighted that frauds are aimed at benefiting the perpetrators at the expense of the persons being defrauded. In the case of banks, whose main dealings are in money, the magnitude of the fraud committed, irrespective of its size has the effect of reducing the capital of the bank. Sanusi(1986) suggests that fraud erodes the capital of any organization and no organization can survive with an eroding capital. It is also regarded as leakage in the economy of a country because it retards economic progress.

Fraud is one of the major causes of bank failure. The amount of money lost to fraudster is large. When such money is taken out of the coffers of the bank, it does not generate any sort of income for the bank. As stated before that the bank’s capital diminishes this will eventually cause liquidity problems. It may cause the bank’s total close down as a result of wind-up where frauds occur with crippling frequency and in wholesale size. In terms of business failures, one estimate

suggests that one third to one half of business failures are attributed to employee theft (National White Collar Crime Center, 2009). The banks reputation could be jeopardized and the customers’ confidence in the bank shaken, when large sums of money are involved. This may eventually cause the withdrawal by so many customers from the bank. Loss of confidence in the banking sub-sector is a consequence of white collar crimes in banks. Holden(1998) states that the public serves as the bank’s customers and it is their deposits that the banks use for business and the public have the confidence in banks to be a safe keeper of their valuables. Holden (1998) goes on to say that in situations where these banks are turned into avenues for fraudsters to practice all sorts of tricks and forgeries, then this confidence would be lost by the banks as the customers will resort to other means of keeping their money without going to banks. Hence banks will find it difficult to mobilize funds from the saving sector to the investing sector and as such investment and production reduces while unemployment rate increase. In addition Braithwaite (1992) suggests that emotional consequences are also experienced by victims of white-collar crime and all members of society exposed to this misconduct. These emotional consequences include stress from victimization, violation of trust, and damage to public morale. Sani (2002) says with regard to stress, any experience of victimization is stressful, but the experience of white-collar crime victimization is believed to be particularly stressful. Much of the stress stems from the violation of trust that comes along with white-collar crimes. This is not healthy to the industry as it tends to disrupt business because of the reactions of customers to such fraud cases. White collar crimes also bring setback on the efforts aimed at making profit, promoting and improving banking habit. Onyimwa (2002) suggest that this is because of the distraction of management’s attention, increase in operating cost and the wastage of time and resources on white collar crime prevention. Illegal, unethical, irresponsible employee’s behaviour must be seen as a composite behaviour, it is these behaviours that damage the core of its purpose, which is to make profit (Blount, 2009). Profit diminishes due to employee’s financial abuse. By eroding the financial aspect of achieving greater profit margins in business, this announces an impact to the profitability of an organization adding expenses on upgrade of security systems and programs.

Sanda (1994), propagates that the state of industrial harmony is always affected as results of white collar crimes because confidence within the bank employees would no longer be cordial because they sought of become suspicious of each other. It has adverse effect on the morale of other staff particularly where white collar crimes go undetected. Employees will be demotivated in that they will end up being inefficient in doing their work which causes a decrease in productivity .It also leads to increase work load on staff and possible entrenchment of outright loss of jobs

2.1.4 Combating white-collar crime

2.1.4.1 Strengthening Internal Controls

Accounting scandals can be reduced if companies strengthen their internal controls. Ekech (1990) propagates that internal audit should form an integral part of the combined assurance model as internal assurance provider .Internal controls should be established not only over financial matters but also operational, compliance and sustainability issues.

2.1.4.2 Severe criminal and civil penalties Li et al (2008) says, according to the Sarbanes-Oxley Act of 2002 if harsh penalties were to be introduced for any acts of fraud by those that are charged with corporate governance this could result in a decrease in such cases of fraud. The Sarbanes-Oxley Act mandated strict reforms to improve financial disclosures from corporations and prevent accounting fraud. Executives would be less likely to commit fraud because of the fear of being imprisoned for a long time. There is evidence to suggest that this legislation has more caution among chief executives about signing accounts that might be inaccurate because of the fear of criminal sentences. The Sarbanes-Oxley Act of 2002 (SOX) is an act passed by United States Congress in 2002 to protect investors from the possibility of fraudulent accounting activities by corporations.

2.1.4.3 Whistle blowers Eliot et al (1984) defines a whistleblower as a person who raises a concern about wrongdoing occurring in an organization or body of people, usually this person would be from that same organization. The revealed misconduct may be classified in many ways,; for example, a violation

of a law rule, regulation and/or a direct threat to public interest, such as fraud, health/safety violations, and corruption. Hence whistleblowers may make their allegations internally or externally. The fraud is usually committed by collusion of various individuals in an organization. Eliot (1984) goes on to say that if the fraud is being perpetrated by those that are charged with the corporate governance in an organization then it might be very difficult to discover that it is occurring. Therefore, the only way this fraud might be discovered is by someone who raises a concern to the regulatory authorities. The complaints can be submitted anonymously. Banks should not take for granted customer feedback, reports, and complaints. Companies often pay little attention to feedback from their customers, vendors, and other external sources. Yet ignoring this feedback can result in a failure to detect and respond to possible fraudulent activity.

2.1.4.4 Ethics A lot of white-collar crimes are committed by persons at managerial and executive levels. Hence, Puah et al (2009) highlighted that the root of the matter would be that ethics should be observed by those in these positions of trust as they are more prone to committing such crimes because of the opportunities available to them by virtue of their positions. Career development of employees is based more on their job performance rather than high ethical standards. Corporate leaders and top level management should be exemplary examples of ethics and integrity. An explicit code of conduct and business ethics should be adopted that managers and executives are required to read, sign and follow. Apart from this, companies must develop a corporate climate that places ethical values above others.

2.1.4.5 Employee background screening Sanda (1994) suggest that there should be pre-employment screening especially for employment applicants for positions involving trust, such as handling cash, inventory, and financial statements and records. Screening of potential employees should involve checks of criminal history, credit reports, verification of employment and education, and drug testing. He further highlighted that employee screening program should be commensurate with the company’s fraud risk and take into account applicable legal considerations

2.1.4.6 Cooperation with prosecution efforts. Wells (2007) suggests that in the event of fraud, execute all required affidavits of forgery, provide requested documentation, and make company staff available as witnesses. It is important that a company consistently demonstrate its commitment to a zero-tolerance policy with support for prosecution of any person found to have been engaged in fraudulent activity. The general public and Government with its agencies should be seriously involved in the fight against fraud. The regulatory authorities should continue to encourage collaboration amongst various stakeholders. That has become necessary in order to facilitate understanding and reduce areas of distrust on the one hand and nurture opportunity for information sharing on the other hand

2.1.4.7 Internal audit/internal investigative units. Sanusi (1986) highlighted that internal investigative units are mechanisms for companies to monitor and look for violations of corporate policy and breakdowns in internal control. Companies should evaluate whether to establish these units separately or to combine them. The internal audit unit must be effective and truly independent in order to enhance objectivity in financial reporting. PricewaterhouseCoppers (2009) propagates that independent audit committee fulfils a vital role in corporate governance and to ensure the integrity of integrated reporting and internal financial controls and identify and manage financial risks. On audit and fraud detection, auditors should be able to recognize fraud if they come across irregularities during their audits, though fraud detection is not the prime reason for their routine audits. In the long term, proper response by the auditor and the organization may not only build professional credibility, but also help organizations to sidestep dangers and avert significant losses.

2.1.4.8 Segregation of duties. Establishing effective segregation of duties involves understanding employees’ roles, responsibilities, and access to financial records, assets, and systems (Wells 2007). A company needs to evaluate its business operations, including: not relying solely on one person to perform an important function or critical task recognizing that segregation of duties and dual control of strategic functions are good internal control systems to deter fraud attempts.

2.1.4.9 Modest Remuneration Ekech (1990) states that in some cases of fraud where there is an overstatement of profit the major reason for the overstatement is so that those that get remuneration according to the company’s profits will get a higher remuneration than if the company had reported losses. Hence, his type of reward system where remuneration is based on profit encourages those in corporate governance positions to overstate profits so they can get higher remuneration. There is need for establishing a proper remuneration system.

2.2 Theoretical framework

2.2.1 Anomie Theory Merton’s (1968) anomie theory can be utilized as a guiding framework when understanding white-collar crime at the aggregate level. Utilizing a corporate-level approach and facets of Merton’s concept of anomie, organizational theories view the corporation as a dominant force in facilitating white collar crime. It is not solely corporate individuals who are deviant, but the corporation as well. Through the use of “pressure” and “stress,” an individual’s choices are influenced by the corporation through cultural beliefs, politics, and external contingencies that are representative of the organization’s culture (Vaughn, 1998). The organizational culture of corporations is a dominant force that can dictate the actions of employees to such a vast extent such that unethical behaviours become a way of life. Middle-range corporate officials typically succumb to the pressures from the corporation and view it as a necessary step to reach the overall institutional goal (Gross 2006). In terms of the corporation deciding to turn to deviant methods, Finney and Lesieur (1982) state that corporations engage in criminal activity under limited rationality in order to reach their goals as well as alleviate financial issues. The concept of limited rationality presents itself when there are limited legitimate opportunities for a corporation to achieve a desired goal therefore innovation takes place in the form of criminal enterprises.

2.2.3 General strain theory Stemming from Merton, a macro-level assessment of Agnew’s (1992) general strain theory indicated that corporations engage in white-collar crime due to a blockage of economic goals and the need for profit. Agnew’s (1992) general stain theory specifically assessses psychological reactions to negative aspects present in one’s life. The key point of general strain theory is that it is not inherently tied to economic strain, but rather the failure to achieve positively valued goals, removal of positive stimuli, and the presence of negative stimuli that can produce anger. From a white-collar crime standpoint, corporate employees may turn to white-collar offending for fear of losing their current status and the failure of reaching occupational goal. Langton and Piquero (2007) examined the relationship between Agnew’s (1992) general strain theory and white-collar offending and found that different types of white-collar crimes had different motivations, such as financial concerns and “fear of falling” from their current employment status.

2.2.4 Institutional anomie theory In conjunction with anomic premises, Messner and Rosenfeld’s (1994) institutional anomie theory posits that criminal acts can be attributed to the materialistic focus of society and the need for monetary success. The strong emphasis on economic prosperity can dominate over other institutions, such as education and family. There are four core values that Messner and Rosenfeld (1994) outline, which include achievement, individualism, universalism and materialism. The four tenets describe the need for individual achievement of monetary success, regardless of the available opportunities to reach this goal (Schoepfer and Piquero, 2006). The applicability of institutional anomie theory to white-collar crime is apparent through the culturally accepted goal of economic profit in an increasing competitive business sector (Coleman, 1987). Schoepfer and Piquero (2006) found mixed support for institutional anomie theory when assessing embezzlement. For example, the additive effects suggested that increasing levels of high school dropout rates was associated with increased embezzlement. The economy was also found to predict embezzlement, though not in a way supportive of institutional anomie theory, but increased unemployment was associated with less embezzlement. Although one would expect increased unemployment to lead to increasing rates of embezzlement, Schoepfer and Piquero (2006) suggest that in order for embezzlement to occur in the white-collar crime context an

individual must be employed. Despite the mixed findings, these researchers suggested that institutional anomie theory proves to be promising in explaining white-collar crime.

2.2.5 Fraud triangle theory Many theories have been put forward in an attempt to explain the concept of fraud. Among the most popular in fraud studies include Cressey’s Fraud Triangle Theory (1995), a critical framework for helping companies focus on prevention and deterrence efforts. It describes a triangular relationship between opportunity, pressure, and rationalization. In most cases, all three factors must be present for fraud to occur. Wilson (2004) views “rationalization” as referring to the moral and ethical argument used to justify the act. He goes on further to state that it is typically an early trait of first-time and occasional thieves and do not apply to predatory individuals who have a highly conscious criminal intent to steal from a company or employer such as in an organized-crime situation. While rationalization is a starting point for many individuals, the internal need for rationalization often fades when small lies or thefts are repeated, possibly becoming more frequent or causing more loss. As a result, early detection of fraud is critical in preventing schemes from deteriorating into a more damaging series of occurrences.

Motivation or pressure is the second angle in examining what is driving the individual to commit the act. Wilson (2004) describes “pressure” as the motivation to commit the fraudulent act, just as with rationalization, but the perception of a need or pressure is the key factor. It does not matter whether or not the motivation makes sense to others or is based on reality. Individuals may be facing financial or other personal problems such as gambling, drugs, alcohol addiction, or extreme medical bills.

Wilson (2004) defines opportunity as an environment or temporary circumstance that allows for the fraud to be committed, typically with little perceived chance of getting caught or penalized. This is the ability to override fraud controls. Windows of opportunity exist for wrongdoing when companies have poor internal controls, weak processes and procedures, unauthorized or unchecked access to assets by employees, or a lack of management review and oversight.

In his work, Wesley (2004) developed the “Wesley’s Fraud Management Lifecycle Theory” made up interrelated and interconnected eight stages:; deterrence, prevention, detection,

mitigation, analysis, policy, investigation and prosecution. Unlike the fraud triangle theory, Wesley (2004), view that fraud management activities do not necessarily occur in a sequential or linear flow of the “Fraud Triangle Theory” as a critical framework for helping companies focus on prevention and deterrence efforts. Developed by American Sociologist Dr. Donald Cressey, the theory centers around the three key factors present when an ordinary person commits fraud: rationalization, opportunity, and motivation or pressure.

2.2.6 Rational choice theory Rational choice theory extends to white-collar offenders for a cost-benefit analysis is conducted and the likelihood of getting caught is rather low (Braithewaite and Geis, 1982). Therefore white-collar crime appears to be a viable choice when the potential gain outweighs a rather low rate of detection. The commission of white-collar crime in the realm of rational choice theory is exemplified when a physician engages in fraudulent billing. The physician views the fraudulent act as an attractive opportunity to gain money. Since the effort is minimal due to electronic accessibility, the risk of detection is low with the presence of electronic review only, and the justification that physicians are not appropriately reimbursed by Medicaid or Medicare (Benson et al., 2009). The perceived certainty and severity of formal sanctions is an important aspect when applying rational choice premises to white-collar crime (Paternoster and Simpson, 1992). The concept, bounded by rationality, can be applied to white-collar offenses under the umbrella of rational choice theory, which indicates that rationality may be based on incomplete information and the action is rational at the moment (Simon, 1976). .

2.2.7 Social learning Theory Moving beyond Sutherland’s conceptualizations, Akers’ (1985) social learning approach offers additional insights that can be applied to white-collar crime. Social learning theory moves beyond differential association by including differential reinforcement, imitation, and definitions that can be applied to white-collar crime. When deciding to engage in unethical acts, Jones and Kavanagh (1996) found that managerial influence was significantly related to unethical behaviors among those who were older and had more work experience. This is consistent with social learning in that Jones and Kavanagh (1996) surmised that those who had work experience

viewed their boss as an example of what constituted proper business behavior, which is consistent with the concept of imitation. Piquero etal (2005) found in their sample of MBA students that engaging in corporate crime was contingent on the perceived attitudes of the board of directors and coworkers they were close to, suggesting differential associations and reinforcement are important. The effect of the corporate climate was found to influence individuals to an extent that nulled the influence of peer and family attitudes supporting ethical attitudes (Piquero et al., 2005). For example, a number of respondents claimed that they would engage in corporate crime that could lead to the injuring and even death of innocent people in the event that there were strong pressures emanating from the corporate climate (Piquero et al., 2005). Also, Geis (1967) found that employees in the electric industry learned the ways of illegal price-fixing and it was deemed the “established way of life.” Embracing the corporate environment can ultimately lead to learning definitions favourable to white-collar crime through the imitation of unethical behaviours from top corporate officials and in turn the behaviour can be reinforced either through monetary gain or job security.

2.3 Empirical evidence 2.3.1 A Comparative Study on White-Collar Criminals in the United States and Japan Kimberly Aramburo, such (2011) The purpose of this study was to identify the reasons for white-collar crimes and to highlight factors that lead individuals to commit white collar crimes. It also looked into the effects of business crimes on corporations and various ways to reduce these crimes. The research looked at white-collar crime in the United States and Japan utilizing primary and secondary research. Two interviews were conducted with business managers and various types of literature were used to test hypotheses. The study found out that psychological factor like narcissism, extroversion and impulsiveness lead to white collar crimes. It also found out that white collar had negatively affect business financially both in the United States and Japan. The study revealed the effective strategies to reduce white collars which are: companies can enhance their ethics training to include white- collar crime; this will bring attention to the issue, as well as make the workers aware that the company will have zero tolerance for fraudulent activities. Companies can also help reduce the

opportunities for individuals to partake in these illegal actions. Concerning the American society’s view on white-collar crime, the ethics training will bring to light that although it is overall more acceptable in society to be a white-collar criminal than a street criminal.

2.3.2 The impact of forensic accounting services on fraud detection and prevention among commercial banks in Kenya by Omondi E.O (2013) The objective of this study was to examine the impact of forensic accounting services on fraud detection and prevention among commercial banks in Kenya, the most prevalent type of fraud and to establish the major areas of application of forensic accounting services. The data collection instrument preferred for the study was a questionnaire.

The study used descriptive research survey design and a sample of 47 respondents in 16 commercial banks in Kenya. The data was analyzed using Statistical Package for Social Sciences (SPSS). The study findings indicated that the application of forensic accounting services by banks led to increased fraud prevention in the commercial banks and the highest application was on enhancing quality of financial reporting. The most prevalent type of fraud in the banking sector was fraudulent expense claims and the study also found that fraud detection and prevention increased when forensic accounting services was employed.

2.3.3 A study to investigate the reasons for bank frauds and the implementation of preventive security controls in Indian banking industry by Khanna A, (2009) The study sought to evaluate the extent of implementation of internal control mechanism. It aimed to identify the procedural lapses and various other causes responsible for bank frauds and to know the perception of bank employees towards bank frauds and their compliance towards implementation of preventive mechanism. It evaluated the factors that influence the degree of compliance. A survey was administered to 253 bank employees of the area under study, which comprised of some important districts of Uttrakhand state of India and adjoining areas. A closed ended questionnaire was used to know the opinion of bank employees. The selection of the respondents was done through multistage random cluster sampling. From the list of 36 banks 17 banks were selected randomly. The branches were also selected randomly and the selection of branches in different areas was done proportionately.

The results indicated that the security control measures prescribed were not fully complied with and that if they were followed with 100 percent adherence these could greatly prevent frauds. The level of compliance of these security controls was measured under six heads, these were, internal checks, deposit accounts, administration of cheque books and passbooks, loans and advances, drafts, internal accounts and inter branch accounts. This shows that a proper system was not developed to abreast the bank employees of various frauds that perpetrate in banks every now and then, or the reason could be that the circulars that are were circulated among various banks by either their respective head office or the Reserve Bank of India, containing information about the modus operandi of frauds committed remained at the desk of manager. The manager neither communicated the information to his staff members, nor did he give due attention to it. The result of the hypothesis testing revealed that there was a significant difference in the awareness level among the three categories of employees at three different hierarchal levels. This can be attributed to the fact that managers get more opportunity to read news or circulars circulated from the head office and Reserve Bank of India to them, since circulars go directly to them first. There was a significant difference among the awareness level of employees of various banks. This may be due to the reason that organizational culture, training status and communication process differ for different banks

2.3.4 Implications of Fraud on Commercial Banks Performance in Nigeria Nwankwo, O (2009) This study was set at evaluating the impact of fraud on the performance of commercial banks in Nigeria. It also sought to ascertain the relationship between bank ATM Fraud, Forged Cheque, Clearing Cheque Fraud and bank performance. The methodology adopted in testing objective of this study was regression analysis.

The outcome of the research revealed that there was a significant impact of fraud on the performance of commercial banks in Nigeria. The implication of this was that if the level of fraud in commercial banks did not reduce to the barest minimum, this would not allow them to perform well by contributing to the growth of Nigerian economy. A recommendation that there was an urgent need for effective monitoring of bank fraud through the use of ATM to allow for

the growth of Nigeria commercial banks performance was given. This was necessary especially when the world was going cashless and ATM was the main instrument for cashless banking system of payment.

2.3.5 An Investigative Study of Banking Cyber Frauds in public and private Sector Banks. Soni R. and Soni N, S(2013) India The study aimed at introducing the concept of cybercrimes in banks, presenting relevant data in understandable formats, making meaningful analysis of the data belonging to banking cyber frauds of different banking sectors. Secondary data was published by Reserve Bank of India and redesigned to suit the research study. Tables and graphs were used for comparative analysis. The study revealed that private sector banks had the largest share in banking cyber frauds. However, overall a declining trend was observed in cyber frauds in private sector bank. The study showed that a bigger share of frauds in private and foreign banks were related to online banking, ATM, cards and other digital banking transactions. Even with the reducing number of cases, the value of such cases did not come down proportionately. Banking cyber frauds in the country were the result of the introductory phase of banking technology like ATM, online banking, mobile banking.

2.3.6 Fraud in the banking industry in Kenya. A case of commercial banks of Africa, Kenya. Maryanne, W. W (2014) This study sought to assess fraud in the banking industry in Kenya using the Commercial Bank of Africa (CBA) as the case. The objectives of the study were: to establish the causes of fraud at CBA, examine the types of frauds committed and determine the appropriate strategies for prevention and control of fraud. The study utilized a descriptive research design using CBA bank as the case. The study was conducted using all employees of CBA with Nairobi County. A sample of 68 employees representing 33% of the population was selected using a stratified random sampling technique. Data for the study was collected using an online questionnaire to reduce costs and for convenience to all the respondents. Data collected was analyzed using SPSS.

The study found that, fraud in CBA was accorded very high priority. The major causes of fraud in the bank were availability of opportunities for fraud, rationalization of fraud acts and pressure to commit fraud. Opportunities for fraud were present due to relaxed internal controls and accounting systems, inadequate supervision of subordinates, disregard for customers, inadequate due diligence requirements and poor personnel policies. Secondly, this study found that employee fraud was the most common fraud in the bank while third party fraud was second. Management fraud in CBA was very low. Some of the forms of fraud identified include: cash theft, use of forged documents, cards fraud, letters of credit fraud and impersonation. Further, this study found that there were very effective strategies to prevent and control fraud. However, the most effective strategies for prevention and control of fraud are: use of ICT tools such as passwords and firewalls, strengthening of internal controls and systems, encouragement, communication, rewards and recognition of employees, performance management, improvement and hiring systems and policies, use of expected and unexpected audits and use of analytical tools. The study concluded that the most dominant factor influencing or accelerating fraud in CBA was the availability of opportunities for fraud. Further, the establishment of an ethical culture within the organization structure was critical in fraud management. Secondly, this study concluded that employees are the primary drivers of fraud through forging of documents, opening and management of fictitious accounts, claiming unearned benefits and computer frauds. On the other hand, management was the least contributors to fraud in the bank. The study further concluded that the most effective strategies for prevention and control of fraud were use of ICT tools, use of analytical tools, use of audits, strengthening of internal controls and application of customer and human resource management systems in the bank. This study recommended that banks should implement systems and structures that reduce the opportunities for fraud. In addition to strengthening internal control systems and structures, banks can use ICT tools to reduce opportunities or instill punitive measures for employees engaging in fraud and fraud related incidences. Secondly, decentralize the functions of employees and ensure there are adequate authentication and control structures and systems in place to reduce employee fraud. Furthermore, employees should be regularly rotated between departments. This study recommended that ICT should form the core backbone for the prevention and control of fraud. This is because ICT can be used to track, identify and report cases of fraud.

2.3.7 A study on white collar crime in South Africa. Naicker K (2006) The general purpose of the study was to identify the different trends of white collar crimes being experienced by South African companies. It also sought to provide the relevant stakeholders, including internal auditors, directors, employees and shareholders with an adequate understanding of white collar crimes. The survey study was used and questionnaires as the research instruments were used. Data was collected from all sectors of the economy including the financial institutions, construction companies, mining companies, retails shops.

In his study he showed that fraud is the frequently committed white collar crime in South Africa. These included among others general fraud, assets misappropriation, cheque fraud and credit card fraud. Corruption and embezzlement also had a high frequency rate while money laundering and cybercrime had the lowest rate of occurrence. The research also discovered that all companies in the study had a medium of reporting fraud. Middle management and junior employees are the major white collar crime perpetrators of fraud since they are the ones involved mostly in the day to day running of the business operations. The study also evidenced that nearly 90% of the respondents said they had a formal fraud policy in place and this stood as a security measure against fraud. Most white collar crimes were discovered through the whistle blowing activity while external auditing provided the least crime detection procedure. The study included a recommendation that implored on the effectiveness of training.

2.3.8 The effectiveness of forensic auditing in detecting and preventing fraud in Zimbabwean Banks. Njanike et al (2009)

It looked into different types of bank fraud that required attention by forensic auditors in Zimbabwean banks. The study was administered by the use of questionnaires and personal interviews as well as document review. Auditors from thirteen commercial banks, four building societies and four auditing firms were used.

According to the results found the notable types of bank fraud were, credit card fraud, identity fraud, credit card fraud, account, fraud, computer fraud and fraudulent RTGS in Zimbabwe and these were discovered to be challenges in the banking institutions. Amongst these five the dominant cases included cheques fraud, identity fraud, credit card fraud, computer fraud and

ATM fraud which accounted for nearly 90% of bank losses. The study also showed that forensic auditing had a role to play in the overall protection of bank assets. Forensic auditors had a mandate to detect potential bank fraud and if occasioned, conduct investigations of cases at hand and at least suggest effective ways of preventing occurrence of such frauds. Those that were difficult to detect and investigate included those which are computer related or which the computer is used as a conduit to commit fraud.

2.4 Gap analysis The empirical literature on the impact of white collar crimes on the banking industry is vast and diverse. Khanna and Eseoghen’s researches have been done on the causes or reasons and possible remedies of bank frauds only as a type of white collar crime. Nyambura focused on the factors for occurrence of cybercrimes in e-banking and Osmond dwelled on the impact of forensic accounting service on fraud detection. Naiker (2006) carried out a study in various companies on different trends of white collar crimes experienced by South African companies using a survey design so as to provide the relevant stakeholders, including internal auditors, directors, employees and shareholders with an adequate understanding of white collar crimes. Also Njanike et al (2009) conducted a research on the effectiveness of forensic auditing in detecting and preventing fraud in Zimbabwean Banks. Thirteen commercial banks and four building societies were used.

However, this research will analyze and dwell much on the impact of different types of white collar crimes. The research will be different from other researches in such a way that information will be gathered from Commercial banks which will be confined to the city of Harare in Zimbabwe

2.5 Chapter summary This chapter looked at literature review related to the studies related to white-collar crime and reasons for committing such crimes, sources of literature, theoretical and empirical evidence. This critical assessment of literature regarding white collar crimes revealed contrasting views in that the causes of white collar crimes are significant factors in formulating preventive measures in reducing the negative impact in commercial banks. Despite the latter view much literature stated the importance of internal management control in reducing the occurrences of white collar crimes. The following

chapter focuses on the research design, that is, the steps taken to ensure validity of the research findings as well as the research instruments used for data collection in defining the impact of white collar crimes in commercial banks in Zimbabwe.

CHAPTER III

RESEARCH METHODOLOGY

3.0 Introduction This section explains how the research was carried out. It focuses on the research design of the study and instruments that were used for collecting data. Primary and secondary data collection techniques were used to collect data in investigating the impact of white collar crimes in commercial banks. This chapter also highlights steps taken to ensure validity of research findings and conclusions.

3.1 Research Design According to Myres (2009) a research design is the general plan of the research project with the purpose of providing clear guidelines and procedures with regard to how the research will be conducted. This study adopted a descriptive survey research design. Sunders (2009)defines a descriptive study as one in which information is collected without changing the environment that is nothing is manipulated. Descriptive survey studies involve a one-time interaction with groups of people or a study might follow individuals over time. The researcher interacts with the participant, may involve questionnaires or interviews to collect the necessary information.

3.1.2 Justification of descriptive survey research design

The descriptive survey research design was used in which 14 commercial banks participating in the research. According to Leedy and Ormond (2005) the purpose of survey research is to generalize from the sample of a large population in order to be able to make inferences about some characteristic, attitude or behavior of the population. A survey design is relatively an inexpensive way of collecting a lot of information on a large sample in a short time as it offers wide coverage that is covering a number of commercial banks in this case 13 banks (Mitchell

and Jolley, 2007). It is also fairly reliable because of large numbers and relatively low administration costs and the data gathered can be analyzed statistically. Hence the descriptive survey research design was selected for this research because the strategy gives more control over the research process while collection of a large amount of data from a sizeable population in a highly economical way to overcome budget and time constraints. However, more time is to be spent ensuring that the sample was representative and piloting data collection instruments to ensure a good response rate and analyzing the results. In addition the descriptive survey research design involves high cost of planning and high cost of implementing.

3.2 Research Population Saunders et al. (2003) defined a population as the aggregate individual units of analysis from which a survey sample will be derived. The researcher concentrated on 13 commercial banks in Zimbabwe specifically those located in Harare because it is centrally located and that commercial banks are highly concentrated within this city. Data was more accessible at the headquarter offices of the targeted banks. There are several commercial banks in Harare and these include Standard Chartered Bank, CBZ Limited, Stanbic, FBC Bank, Barclays Bank of Zimbabwe, ZB Bank, Steward Bank Zimbabwe, Banc ABC bank, NMB Bank Limited, Allied Bank, MBCA Bank Limited, EcoBank and MetBank. In this study, the possible respondents consisted of risk managers, internal auditors, finance officers/accountants, bank tellers, and other professionals

3.3 Population sample Hussey et al (1997) defined a sample size as a subject of population and should represent the main interest of the study. In this study the sample included 5 banks each having 8 respondents hence the sample size totaled to 40 respondents. However a total of 32 respondents took part in the study.

Table 3.1 Sample size

Number of respondents Risk management 3 Internal auditors 5 Finance officer/Accountants 6 Bank tellers 10 Other professionals 8 Total 32 respondents Source: Primary data

3.4 Sampling techniques

3.4.1 Purposive sampling

Aakker (1998) defines purposive sampling as a non-probability sampling method that is characterized by a deliberate effort to gain representative samples by including groups or typical areas in a sample. The researcher relied on her judgment to select a sample of subjects thus preventing unnecessary and irrelevant items entering into the sample per chance. The researcher used the purposive sampling method in selecting interview respondents. Two interview respondents were selected from each bank to make 10 interview respondents

3.4.2 Stratified sampling method Stratified sampling method was used in selecting questionnaire respondents. Cooper and Schindler (2003) highlighted that stratified sampling is the commonly used probability method that is superior to random sampling because it reduces sampling error. The researcher first identified the relevant strata and their actual representation in the population. Examples of strata that where identified were accountants and bank tellers. Random sampling was then used to select a sufficient number of individuals from each stratum. Two individuals were selected from each stratum from each bank and two other professionals to make 30 questionnaire respondents.

3.5 Research Instruments

3.5.1 Questionnaires According to Cooper and Schindler (2003) a questionnaire is a document containing designed questions to solicit information appropriate for analysis. The questionnaire used contained more of close-ended and a few open ended questions. A questionnaire therefore afforded time to answer the questions, simultaneously giving the researcher enough data for analysis. Questionnaires were easy to administer and covered a wide range of issues. They were also cost effective method of data collection given the resource base the researcher had.

3.5.2 Strengths of questionnaires

 The questionnaires were easy to standardize. For example, every respondent was asked the same question in the same way. The researcher, therefore, ensured that everyone in the sample answered exactly the same questions, which made it a reliable method of collecting data.  Generally, it was quick to collect information using a questionnaire.

3.5.3 Limitations of use of questionnaires

 The response rate was very low. Not all of the questionnaires were returned as some respondents misplaced them.  Questionnaires were standardized, so it was not be possible to explain any points that were misinterpreted by the respondents.  The open-ended questions that were used in the questionnaire generated a large amount of data from the few respondents that took a long time to process and analyze.

3.6 Interviews An interview is a purposeful discussion between two or more people whose intention is to gather valid and reliable data that is relevant to research questions and objectives (Myres, 2009). Open- ended questions allowed respondents to answer in their own words thus enabling varied responses to be obtained from them. Structured interviews questions were also used which did

not restrict the respondents to a given set of solutions. Since the thrust of the researcher was to get respondents’ views rather than come up with a statistic analysis, open-ended questions were mostly appropriate for such an undertaking. Face to face interviews were conducted with the risk managers and the internal auditors from each bank.

3.6.1 Advantages of interviews

 Interviews afforded the respondents an opportunity to seek clarification on unclear questions and to have a clear understanding of the subject thus enabling them to give appropriate responses.  Facial expressions revealed a true picture of the respondents’ attitudes and feelings on matters that were raised by the interviewer. Such flexibility enhanced the quality of the detail as clear meanings were derived from the discussions and coverage of the data increased immensely.  The major strength of the interview technique was that the researcher adapted the questions where necessary, clarified doubts and ensured that the questions were properly understood by repeating and rephrasing the questions through prodding and probing.  Interviews made it possible for the researcher to collect complete information from the sampled respondents.

3.6.2 Disadvantages of personal interviews

 Interview process was time consuming which resulted in a reduction in willingness of respondents to participate. To limit the boredom of long interview sessions, the researcher set time limits of 15 to 20 minutes to complete each interview process.  The open-ended questions which were used by the researcher in the interview approach caused confusion because of lack of understanding of the respondents’ answers by the interviewer. The interviewer probed further to seek clarification in such instances.

3.7 Data collection procedures

3.7.1 Pilot Study The researcher delivered two questionnaires separately to ZB Bank and FBC bank for pilot study. This was done prior to the distribution of questionnaires to the banks. The respondents

found sensitive questions which were needed to be adjusted otherwise the permission granted to distribute questionnaires was going to be granted. Two interviews were also conducted.

3.7.2 Questionnaire Distribution The researcher physically distributed the questionnaires in person by hand to respondents who were conveniently selected and collected them after five days

3.7.3 How interviews were conducted Managers were contacted for appointment bookings for face to face interviews. Having been granted an appointment slot, the researcher conducted the interview within time limits using an interview guide. The time limits ranged from 15 to 20 minutes per respondent.

3.8 Data validity and reliability According to Myers (2009) reliability relates to the dependability of the research and the extent to which a particular collection approach will yield the same results on different occasions. The researcher chose a pilot sample upon which questionnaires and the interview guide were to be administered. The researcher pre-tested two questionnaires and conducted an interview with two banks two weeks before fieldwork. Therefore, the questionnaire was assumed to be reliable as it was pretested in an effort to reveal ambiguities, conflicting items that were not relevant to the purpose of this study.

However, the interview method was also considered reliable as there was also a pretest on the interview schedule to compare whether the interview finally conducted would produce the same results.

According to Leedy and Ormond (2005) validity is the ability of an instrument used to measure what it is designed to measure and the extent to which its design and the data it yields allow the researcher to draw accurate conclusions about the relationships within the data. The interview method that was used in this study was valid because the inferences that were made from individual responses were appropriate, meaningful and useful.

The questionnaire was also valid to some extent in that the questions set solicitude required information. However, the questionnaire lacked validity on the other hand because some

participants tend to lie and only gave desired answers especially where quantitative data is to be gathered.

3.9 Data presentation and analysis According to Aakker (1998) data analysis consist of applying statistical techniques to a database in order to make inference about variables or study. He also says that it plays a role in data quality assessment by pointing data problems in the research. Data from various respondents was grouped and synthesized to come up with critical analysis of the findings. The researcher used descriptive statistical techniques in which graphs, tables and pie charts were utilized for data presentation using Microsoft Excel. SPSS was also employed in analysing quantitative data.

4.0 Chapter Summary This chapter mainly highlighted the research design and the data collection methods that were used to elicit information. The research instruments that were used in the study were explained citing their different advantages and disadvantages to this particular research. The following chapter focuses on the analysis, presentation and discussion of data that was collected from commercial banks through the use of questionnaires and interviews.

CHAPTER IV

DATA PRESENTATION AND ANALYSIS

4.0 Introduction This chapter focuses on data analysis, presentation and discussion of data collected from commercial banks. The findings were based on primary data collection where questionnaires were designed and interviews were carried out. Column graphs, bar graphs and pie charts were used as analytical tools to analyze data.

4.1 Analysis of Data Response Rates

4.1.1 Questionnaire Response Rate Table 4.1 Questionnaire Respondents

Questionnaires Questionnaires Percentage response distributed. returned. rate % Bank 1 6 5 83% Bank 2 6 6 100% Bank 3 6 6 100% Bank 4 6 5 83% Bank 5 6 2 33% TOTAL 30 24 80% Source: Primary data N=30

Table 4.1 shows that the average questionnaire response rate was 80%, which is valid and representative. Two banks yielded 100% response rate, the other two got 83% and the least 33%.

4.1.2 Interview response rate Table 4.2 Interview respondents

Interviews scheduled Interviews conducted Percentage Response rate %

Bank 1 2 2 100%

Bank 2 2 1 50%

Bank 3 2 1 50%

Bank 4 2 2 100%

Bank 5 2 2 100%

Total 10 8 80%

Source: Primary data

N=10

The Table 4.2 shows that the interview response rate was 80%. The researcher had targeted a total of 10 interviews but however 8 were conducted. Bank staff was busy and interview appointments were cancelled. Therefore the response rate was adequate and representative of the population and justifies the use of the findings as a basis for making conclusions and recommendations.

4.3 Demographic information of respondents

4.3.1 Gender Most of the respondents were males with 60% 19 whereas females were only 40%. 19 were males whilst females were 13. (Fig 2).

Gender

40% Males Females 60%

Fig 1: Gender of respondent

N=24

4.3.2 Academic Qualification respondents

Among the respondents, 10% had post graduate degrees, 23% had undergraduate degrees, 23% had diplomas, 33% had O level or A level and 10% had other qualifications (Fig 3).

academic qualifications

10% 10% 33% O level/A level Diploma 24% Undergraduate degree 23% Post graduate degree others

Fig 2: Respondents Academic qualifications

N=24

Level of education showed that 10% had post graduate degrees, 24% had degrees , 23% had diplomas and 33% had O/A levels.. This shows that the respondents were knowledgeable in understanding white collar crime in the banking industry.

4.3.3 Respondents’ Length of Service Fig 3 shows the period of employment of the respondents in the selected banks. The majority of the respondents (63%) had worked for seven years and above in the banks hence this entails a greater degree of validity. However, 17 % had served in their organisation for a period of 4 to 6 years while 20 % had served for 1 to 3 years.

0.7 63% 0.6

0.5

0.4

0.3 20% 0.2 17%

0.1

0 1-3years 4-6years 7 years and above

Fig 3: Period of employment

N= 24

4.3.4 Job title Fig 5 shows the occupation of the respondents. 33% were bank tellers, 25% accountants, 17% risk managers, 17% internal auditors and 8% from other departments.

Other professionals 8%

Accountants 25%

Bank tellers 33%

Internal Auditors 17%

Risk managers 17%

0 0.05 0.1 0.15 0.2 0.25 0.3 0.35

Fig 4: Occupation of respondents.

4.3 Prevalence of white collar crimes Table 4.3 Prevalence of white collar crimes

DNO NC C/VC Freq % Freq % Freq % Money laundering 4 17 5 20 15 63 Cheque fraud 0 0 20 83 4 17 Embezzlement 0 0 0 0 24 100 Electronic card fraud 4 17 7 29 13 54 Fraudulent RTGS 2 8 3 13 19 79 transactions Source: Primary data

N=24

Key: DNO- Does not occur, NC- not common, C- common, VC- very common.

The majority of respondents (63%) revealed that money laundering is common in commercial banks followed by those who said it is not common (20 %) while a few (17%) said there are no incidences of money laundering in commercial banks. This is in line with Tuner (2011) who states that money is laundered through financial institutions taking the advantage of indivisible

nature of money when it is mixed with lawful money. This finding contradicts with the conclusions made by Naiker (2006) in his study where he indicated that money laundering had the lowest rate of occurrence in South African companies. This could be because there is no adequate and advanced technology for prevention of money laundering in Zimbabwe

However, all the interview respondents acknowledged the existence of money laundering in commercial banks. Amongst the respondents was one of them who revealed that there is lack of knowledge about money laundering as a crime to some of the bank employees. This related to what it is and how it takes place. The respondent pointed out that banks are in the process of alerting their employees especially new staff about money laundering.

All the respondents (100%) indicated that embezzlement is very common in commercial banks. This implies that employees have an appreciation on embezzlement as much as it is concerned in banks. The findings also relate to the conclusion drawn by Naiker (2006) who asserted that embezzlement had high frequency rate of occurrences in South African companies.

The interviewees also identified embezzlement as the most prevalent and dominant white collar crime in commercial banks. One of the respondents revealed that in their organization embezzlement was common to bank tellers where they are entrusted with cash and most of them would just loot the cash from their daily takings.

The Majority of the respondents (83%) were of the view that cheque fraud is not common in commercial banks.Most interviewees also supported the view that cheque fraud is not common in commercial banks especially in the Zimbabwean economy because of the reduction in the use of cheques by individuals. Only (17%) of the respondents agreed to the occurrences of cheque fraud in commercial banks. However, these findings differed from the conclusions made by Naiker(2006) who found that cheque fraud was the frequently committed white collar crime in South African companies.

The majority of the respondents (54%) indicated that electronic card fraud is common in commercial banks while 29% revealed that this type of white collar crime is not common and a few (17%) were of the view that it does not occur. Soni (2013) established the same view in his study in Indian banks indicating that was a bigger share of private and foreign banks in frauds related to online banking, ATM and cards.

A few of the respondents (8%) indicated that fraudulent RTGS transactions do not occur in commercial banks. Only (13%) were of the view that fraudulent RTGS transactions are not common. Majority of the respondents (79%) acknowledged the existence of fraudulent RTGS transactions in banks. Njanike et al (2009) found also similar conclusions in a survey of Zimbabwean banks as he noted that fraudulent RTGS transactions were discovered to be a challenge to the banking institutions.

The interviewees also agreed with the view that fraudulent RTGS transactions are common in commercial banks. Perpetrators tend to divert the transaction to their accounts or to a fictitious account. The RTGS forms, once they have all the required signatories and if there are no proper internal control systems they can be used to commit fraud.

In addition to white collar crimes identified through the questionnaires, interviewees noted other types of white collar crimes that are corruption, commercial espionage and insider loans as other types of white-collar crimes that were being perpetrated in the banking sector.

All the respondents (100%) identified corruption as a disgusting and a cause of concern white collar crime in Zimbabwean commercial banks. This is the misuse of entrusted power or authority by office bearers for private gain. This finding also concurs with Naiker (2006) findings that corruption had a high frequent rate in South African companies. Some of the respondents stated that corruption was dominant in the procurement department where employees accepted bribery from bidders so that they can win the tenders.

Commercial espionage is the trade secret theft by employees or outsiders so as to benefit another organisation. Trade secrets are practices, processes or designs which are not known by others, and they help organisations to obtain competitive advantage. They are not to be disclosed to the world at large and their misappropriation is regarded as crime because employees are entitled to sign oaths of secrecy. Employees tend to sell these trade secrets for their personal gain; however respondents indicated that this crime had an average rate of prevalence.

The interviewees also added insider loans as a white collar crime which had a high rate of prevalence. This is whereby the top officials such as directors advance to themselves loans worth millions of dollars for personal use. One respondent revealed that they usually account these

loans as housing loans. At the end these directors resist to repay the loans. Time bank and Kingdom bank were cited as banks that collapsed because of insider loans.

4.5 Impacts of white collar crimes in commercial banks. Respondents were asked to indicate level of agreement to the given impacts white collar crimes. The researcher identified six impacts namely jeopardize bank reputation, diminishes profits, demotivates staff, collapse banks, loss of customers, and erodes capital. The results are presented in the table below.

Table 4.4 Impacts of white collar crimes in commercial banks.

Impacts SA A N D SD Freq % Freq % Freq % Freq % Freq % Jeopardize bank 20 83 4 17 0 0 0 0 0 0 reputation Diminishes profits 19 79 5 21 0 0 0 0 0 0

Demotivates staff 10 42 5 21 0 0 4 16 5 21

Collapses’ banks 20 83 3 13 1 4 0 0 0 0

Loss of customers 20 83 0 0 4 17 0 0 0 0

Erodes capital 20 83 2 8 2 8 0 0 0 0

Source: Primary data

N=24

Key: SA-Strongly agree, A-Agree, N-Neutral, D-Disagree, SD-Strongly Disagree

4.5.1 Jeopardize bank reputation

0% 0% 0%

17%

Strong agree Agree Neutral Disagree 83% Strongly disagree

Fig 5: Response on whether white collar crimes jeopardize bank reputation

N=24

The majority of the respondents (83%) strongly agreed that white collar crimes jeopardize banks’ reputation and a few (17%) agreed to that fact. The interview respondents were also of the view that once a bank become a victim of white collar crimes it indicates its poor governance to the world hence its reputation is affected. This is subsequently in line with Braithwaite (1992) whose contributions to the issue established that emotional consequences are experienced by victims of white crime.

4.5.2 Diminishes profits

0% 21% Strongly agree Agree Neutral Disagree Strongly disagree

79%

Fig 6: Response on whether white collar crime diminishes profits

N=24

None of the respondents were neutral on the view that white collar crime diminishes profit. All of the respondents agreed that profits are reduced due to white collar criminal activities. The findings relate to Aramburo (2011) whose study in America and Japan concluded that white collar crime negatively affected business financially.

4.5.3 Demotivates staff

0.45 42% 0.4 0.35 0.3 0.25 21% 21% 0.2 16% 0.15 0.1 0.05 0 Strongly agree Agree Nuetral Disagree Strongly disagree

Fig 7: Response on whether white collar crimes demotivate staff

N=24

The majority of the respondents (63%) were in agreement to the view that white collar crimes demotivate staff and a few (37%) of the respondents were not in agreement. Interview respondents supported this as they gave a further explanation that to a large extent white collar crime activities have a lot of consequences that bear directly on the system therefore employees are usually affected indirectly in that they will not be aware of the root causes. This concurs with Sanda (1994) who pointed out that confidence among the bank employees can be affected because they become suspicious of each other hence employee morale is reduced.

4.5.4 Erodes capital

90% 83%

80%

70%

60%

50%

40%

30%

20% 8% 8% 10% 0% 0% 0% Strongly agree Agree Neutral Disagree Strongly disagree

Fig 8: Response on whether white collar crimes erode capital

N=24

The majority of the respondents (92%) were of the view that white collar crimes erodes capital base whilst a few (8%) were neutral. The interviewees were also of the view that working capital of the business is affected negatively. The same view has also been suggested by Oninyiwa (2002) that, because of increases in operating costs and wastage of time and resources on white collar prevention, the capital base of banks which could otherwise be used for profit making gets eroded.

4.5.5 Collapses banks

0.9 83% 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 8% 8% 0 0% Strongly agree Agree 0% Neutral Disagree Strongly disagree

Fig 9: Response on whether white collar crimes collapse banks

N=24

From the findings the majority of respondents (92%) indicated that white collar crimes collapse banks and a few of them (8%) were neutral. This was also revealed by the interview respondents whereby some of them were even citing examples of banks that collapsed due to these crimes such as Kingdom bank and Time bank. It was said that there were cases of insider loans where the top official took out large sums of money and never repaid it back. This is also in line with a report by the National White Collar Crime Centre (2009) that one third to half of business failures is attributed to employee theft.

4.5.6 Loss of customers

0% 0%

17% 0%

Strongly agree Agree Neutral Disagree 83% Strongly Disagree

Fig 10: Response on whether white collar crimes cause loss of customers

The results suggest that white collar crime results in the loss of customers as the majority of respondents (83%) agreed to that fact whilst a few (17%) were neutral. The interview respondents gave a further explanation that customers may withdraw their funds when large sums of money are involved in white collar criminal activities because of fear of the unknown. This is supported by Holden (1998) where he states that when banks are turned to avenues for fraudsters, customers will resort to other means of keeping their money without going to banks.

However, loss of potential investors and competitive advantage was also pointed out as other consequences of white collar crimes in commercial banks.

4.6 Ways to reduce white collar crimes This was an open ended question which required the respondents to list the measures they have put in place within their organisations and other preventive measures that can be implemented to curb white collar crime. The majority of the respondents suggested job rotation as a way to reduce white collar crime. The study found out that being into routine activities creates an

environment of fraud to occur in that one will be aware of all the loopholes in a certain area. Therefore respondents were suggesting job rotation so as to reduce crimes.

This study also found out from the respondents that they were in support of the idea of carrying out Anti-money laundering campaigns in their banks. Respondents revealed that this is accordance Section 3 of the Bank Use Promotion and Suppression of Money Laundering Act Number 2 of 2004 (Chapter 24:24). The purpose of the act is to promote the use and suppress the abuse of the bank system. It requires financial institutions and cash dealers to take measures to combat money laundering. Therefore banks are required to report the suspicious transactions to the financial intelligence unit of the Reserve Bank of Zimbabwe to enable the unlawful proceeds of all serious crime to be identified and eventually confiscated.

Some of the respondents suggested that besides internal and external audits in banks there is also need for forensic auditing on an annual basis. This was said to be a more effective type of audit that unravel more audit evidence. This concurs with results found in a study conducted by Njanike et al (2009). The study also showed that forensic auditing has a role to play in the overall detection of potential bank fraud especially those that are difficult to detect and investigate including those which are computer related or which the computer is used as a conduit to commit fraud.

Respondents also suggested whistle blowing as measure to curb white collar crimes by exposing any kind of information or activity that is deemed illegal, unethical, or not correct within the bank. This was said to be effective as it can expose illicit activities of the top management. This agreed with Elliot (1984) who concluded that, if fraud is perpetrated by those that are charged with the corporate governance in an organisation it might be very difficult to discover that it is occurring. Whistleblowers can reach out to the media, government, law enforcement or all those concerned so that corrective measures are put in place.

Ethics training was also cited as to reduce white collar crimes. Respondents acknowledged that managers are being trained so as to learn how to deal with unethical situations. Codes of ethics are put in place to curb white collar crimes in their banks. Respondents stated that ethics provides a guide to employees for dealing with ethical dilemmas. Aramburo (2011) also recommended in his study that companies can enhance their ethics training to include white-

collar crime and make the workers aware that the company will have zero tolerance for fraudulent activities. There was also a suggestion for effective internal controls from the respondents. This was said to reduce opportunity for committing white collar crimes. The management has the duty of formulation of internal controls and make sure they are being implemented. Cressey’s Fraud triangle theory mentioned opportunity as a factor which leads to the occurrence of fraud, which is an environment that allows fraud to be committed. This is also in line with results found in Maryanne (2014) study in Kenya that opportunity for fraud was present due to relaxed internal controls. Therefore the existence of windows of opportunity is reduced by effective internal controls.

In the study most of the respondents seemed to suggest reasonable salaries for employees so as to reduce white collar crimes. They indicated that employees tend to commit these crimes because of financial pressure. Cressey’s fraud triangle theories also mention pressure as the factor which leads one to commit crime. Respondents stated that in the Zimbabwean situation where there is economic recession people are facing financial problems hence that can motivate one to commit crime.

4.7 Summary The study focused on the presentation and analysis of data using methods outlined in the preceding chapter. The presentation was based of the findings obtained from the questionnaires and interviews. The next chapter gives a summary findings, conclusions and recommendations to the study.

CHAPTER V

SUMMARY, RECOMMENDATION AND CONCLUSION

5.0 Introduction This chapter presents a summary of the research findings, research conclusion and recommendations.

5.1 Summary of the study The study sought to investigate on the impacts of white collar crimes in the Zimbabwean commercial banks. The researcher collected theoretical and empirical data from books and internet resources to have a strong analysis base. Data was collected from the field with the use of questionnaires and interviews. The descriptive survey research design was used. The study had the following objectives:

1. To identify different types of white collar crime on commercial banks.

2. To highlight the impact of white collar crime on commercial banks.

3. To explore ways of combating white collar crime on commercial banks.

5.2 Summary of findings It was discovered that commercial banks were experiencing white collar crimes as the majority of the respondents agreed to their existence in their organizations. The results showed that embezzlement is the frequently committed white collar crime in commercial banks, while cheque fraud had the lowest rate of occurrences. In addition to the crimes identified in the questionnaire like electronic card fraud, money laundering, and fraudulent RTGS transaction, interview respondents cited insider loans corruption and commercial espionage as other white collar crimes committed in banks. Corruption being the most prevalent crime in the Zimbabwean commercial banks. It has become a norm in the financial sector because of the poor economic conditions and

poor governance. It was also discovered that insider loans are being committed by top officials in the banking industry whereby loans are given without repayments.

The study findings identified the impacts of white collar crimes in commercial banks. This included loss of customers, diminishes profits, erodes capital, demotivates employees, jeopardize reputation and collapses banks. Besides these impacts respondents also identified loss of potential investors as another impact in the sense that investors would want to invest their monies where there is proper security therefore incidences of white collar crimes can deter potential investors. Loss of competitive advantage was also identified as other consequences of white collar crimes in banks.

The findings identified measures that should be put in place to curb white collar crimes in their organization. This included anti-money laundering campaigns to create awareness to the employees of the banks so as to exercise effective customer due diligence. Whistle blowing was also identified so as to exhume all the unethical practices at work place. Also ethics training should be carried out to have workers who are responsible and o adhere to the corporate governance pillars. Respondents also suggested forensic auditing, job rotation, modest remuneration and effective internal controls to be other measures that can be put in place.

Conclusion In light of preceding findings, the researcher reached to a number of conclusions which included that employees have a high awareness level on white collar crime that affects banks, they were able to identify different types of white collar crimes and their occurrences. Embezzlement being the most committed crime that affects banks. Also the researcher concluded that white collar crime has a negative effect on bank’s performance as the banks suffer profit losses on crime committed in banks. However it was concluded that policies and training programmes help in preventing white collar crime in banks. Trainings enhance employee knowledge in fighting against crime in banks. Also internal controls are important in the prevention of crimes in banks.

5.4 Recommendations The study attempted to identify white collar crimes that are prevalent in the commercial banks with the notion of establishing its effects on the operational costs and profits of banks and the ways to curb these crimes. Eventually recommendations in the prevention of these crimes are:

 Advanced technology should be used to fight all forms of white-collar crime in the banking sector.  New employees should receive orientation that emphasizes existence of white collar crime and its prevention in financial institutions.  On-the-job training programmes on white-collar crime should include the effects of crime and ways to prevent it. The objective of this is to increase employees knowledge on the nature and take crime seriously and give due attention to matters relating to crime.  Background checks should be done for potential employees for criminal records and not just focus attention on professional qualifications. This eliminates people with a criminal background that pose a risk to the bank. This is in line with the objective of limiting white collar crime risks in banks as employees with a criminal background have a chance of repeating fraudulent activities if they become used to the bank’s internal security systems. Before a bank employee is employed a third party of law enforcement should be included to carry out a background.  Increasing awareness to customers is also imperative. Customer awareness should also be done in ways that appraise them with types of crimes to which they are susceptible to that are likely to be perpetrated against them by bank staff.  Internal controls forensic audits internal audits and external audits.  Encouraging whistle blowing on the work place.  Implementing job rotation.  Adequate remuneration for employees.

5.5 Suggestion for further research The researcher recommends that further research should be done on the causes of white collar crimes that these crimes can be tackled from their grass roots. Researches can also be done on computer related crimes that affects banks since the development of technology provides more methods of committing white collar crime in banks.

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APPENDIX 1: Permission seeking letter Bindura University of Science Education

Department of Financial Intelligence

P. Bag 1020

Bindura

August 2016

Dear Sir/Madam

RE: RESEARCH PROJECT ASSISTANCE

I am a 3rd year student at the above mentioned institution and am carrying out a research on. An investigation on the impact of white collar crimes in commercial banks: A survey of Zimbabwean commercial banks (2010- 2015).This is in partial fulfillment of the requirements of the Bachelor of Commerce Honors degree in Financial Intelligence that I am currently undertaking.

I kindly ask you to assist by completing the questionnaire attached to this letter. The information you provide as well as your personal views will be treated with confidentiality and used for the purpose of this study only.

Your contribution to this research is greatly appreciated

Yours faithfully

Monalisa Tahuwona

B1025613

APPENDIX 2: QUESTIONNARE 1. Gender

Male [ ] Female [ ]

2. Period of employment

1-3years [ ] 4-6years [ ] above 7years [ ]

3. Highest Level of education

O level/A level [ ]

Diploma [ ]

Undergraduate Degree [ ]

Post Graduate Degree [ ] Other (Specify)………………………………………………………………………………..

4. Job title

Accountant /finance Officer [ ] Teller [ ] Internal auditors [ ]

Risk manager [ ] Other (specify) [ ]

5. Can you comment on the prevalence rate of the following crimes. Use the following scale.

(1)Does not occur (2) Not common (3) Common (4) very common

(1) (2) (3) (4) Money Laundering Cheque fraud Embezzlement Electronic card fraud Fraudulent RTGS transactions

6. To what extent do you agree with the following as impacts of white collar crimes on commercial banks? Use the following scale (1)Strongly agree (2) Disagree (3) Neutral (4) Agree (5) Strongly Disagree

(1) (2) (3) (4) (5)

Jeopardize bank reputation Diminishes profits

Demotivates staff

Erodes capital

Collapses’ banks

Loss of customers

7. What other consequences can arise as a result of white collar crimes besides the above mentioned?

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8) What preventive measures have been put in place by your bank to reduce or curb white collar crimes?

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9. What other measures would you suggest to curb white collar crimes?

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Thank you, your participation is greatly appreciated

APPENDIX 3: INTERVIEW GUIDE 1. What is white collar crime in respect of the banking environment? 2. What types of white collar crimes are you familiar with in the banking industry? 3. What would you consider to be the contributing factors to white collar crimes banks? 4. What are the impacts of white collar crime to the overall performance of the bank? 5. What preventive measures have been implemented by your institution to curb white collar crime and how effective have these measures been? 6. What other measures would you suggest to curb white collar crime? 7. Do you have other suggestions on how the problems of crimes can be addressed in the banking industry?