Financial Fraud on the Rise in Ghana: Types of Frauds to Watch Out For

The banking sector in Ghana is facing a serious crisis due to a string of financial fraud cases, resulting in significant losses for depositors and investors. This article explores the types of fraud to watch out for and the factors driving these crimes.

The Crisis in Ghana’s Banking Sector

A recent study by Christine Avortri and Richard Agbanyo of the University of Professional Studies, Accra, Ghana, has highlighted the alarming rate of financial fraud in the country’s banking sector. The researchers attribute this trend to connected lending and lending to affiliated party institutions, which are considered fraudulent corporate governance issues.

The Fraud Diamond Theory (FDT)

The study used the FDT as a framework for analysis, proposing that fraud is driven by four factors:

• Pressure: External forces that push individuals to engage in fraudulent behavior, such as financial difficulties or job insecurity.
• Opportunity: The presence of loopholes or vulnerabilities that can be exploited for personal gain.
• Rationalization: Justifying one’s actions to oneself, often by convincing oneself that the fraud is justified.
• Capacity: An individual’s ability to commit fraud, including having the necessary skills, knowledge, and resources.

Capacity: The Dominant Factor Driving Fraudulent Activities

The study found that capacity was the dominant factor driving fraudulent activities in Ghana’s banking sector. This suggests that many bank employees have the capability to commit fraud but may not necessarily do so due to external factors such as pressure or opportunity.

Recommendations for Regulators and Policymakers

In light of these findings, the researchers recommend:

• Strict enforcement of shareholding structures: Preventing ownership of banks by individuals or families can give Chief Executive Officers too much power and control over funds.
• Severe punishment for offenders: Regulatory bodies should improve their supervision of financial institutions to prevent fraudulent activities.
• Development of policies aimed at preventing fraudulent activities: Government agencies should develop policies to address the growing problem of financial fraud in Ghana.

Conclusion

The study’s findings have significant implications for policymakers and regulators seeking to address the growing problem of financial fraud in Ghana. By understanding the factors driving fraudulent behavior, authorities can take targeted measures to prevent these crimes from occurring in the first place.