Analysis of employee and management fraud in Tanzania
| Pages | 412-431 |
| Date | 01 April 2019 |
| DOI | https://doi.org/10.1108/JFC-01-2018-0012 |
| Published date | 01 April 2019 |
| Author | Omari Zuberi,Siasa Issa Mzenzi |
| Subject Matter | Accounting & Finance,Financial risk/company failure,Financial crime |
Analysis of employee and
management fraud in Tanzania
Omari Zuberi and Siasa Issa Mzenzi
Department of Accounting, University of Dar es Salaam Business School,
University of Dar es Salaam, Dar es Salaam, Tanzania
Abstract
Purpose –The study aims to explore specific motivations, rationalizations and opportunities that are
involved in the occurrences of both employeeand management fraud in the context of an emerging African
country,Tanzania. It builds and extends from the fraud triangle theory.
Design/methodology/approach –A survey was developed and administered to 114 participants who
had witnessed, had examined or had been involved in fraud resolutions. The participants included fraud
examiners, businessmanagers and owners, victims, auditors, lawyers,and law enforcement agents. The data
collectedwere analysed using descriptive analysis, principalcomponent analysis and correlation analysis.
Findings –The results revealedsix motivation factors thatincentivize employees and managersto engage
in fraudulent behaviours. These are businessfinancial strain, social incentives and pressure,greed, operating
problems, internal pressures and malevolent work environment. In addition, fraudsters rationalized their
behaviour through five significant neutralization techniques identified as social weighting, transferring of
blame, denial of injury,attitude and prior fraud history. Lastly, victim organisations were identifiedto have
three mainfraud opportunities: poorcontrol environment, inadequatecontrol activitiesand circumstances that
allowedcollusive behaviour amongfraudsters.
Research limitations/implications –While the study attempted to explore the motivations,
opportunities and rationalizations from the perspectives of the fraud-fighting professionals and witnesses,
their viewsand suggestions might be different from the actual known fraudstersor incarcerated individuals.
Practical implications –Business organisations, fraud-fighting professionals and general community
must understand the factors behind fraud occurrences, so proper measures may be taken to limit the
frequencyand amount of fraud losses.
Social implications –Creation of public awareness and dialogue necessaryfor the prevention, fighting
and deterrenceagainst all forms of fraud.
Originality/value –Despite the occurrences of many scams in both public and private sectors, limited
studiesexist as to the triggers behind fraud occurrencesin the context of the developingcountries and whether
thesetriggers are the same as in other contexts.This study is an attempt to fill this gap.
Keywords Tanzania, Fraud, Employee fraud, Fraud triangle theory, Management fraud
Paper type Research paper
Introduction
Global fraud surveys such as those by Association of Certified Fraud Examiners (ACFE),
PricewaterhouseCoopers, Deloitte, KPMG or Ernst & Young indicate a discouraging trend
towards fraud statistics. These reports and a few other studies have attracted significant
attention to the business community worldwide (Kamarudin et al., 2012). This might be
because of the widespread high-profile corporate scandals such as Enron, WorldCom,
Lehman Brothers, Bre-X, Parmalatand Satyam Computer or the increasing frequencies and
costs associated with fraud globally (Lang and McGowan, 2013;Grove and Basilico, 2011;
Cohen et al., 2010;Rezaee and Davani, 2013;Kassem, 2014). Fraud losses to businesses are
estimated to range from 3 to 9 per cent of annual revenue, which translates to trillions of
JFC
26,2
412
Journalof Financial Crime
Vol.26 No. 2, 2019
pp. 412-431
© Emerald Publishing Limited
1359-0790
DOI 10.1108/JFC-01-2018-0012
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1359-0790.htm
dollars globally (Button et al., 2012a,2012b;Holtfreter, 2004;Aliabadi et al.,2011). One
projection estimatedthe global losses to exceed over $3.5tn per annum(Chui and Pike, 2013).
In this context, employees and management fraud studies in business organisations are
worth undertaking in an attempt to combat fraud. The need is particularly huge in the
context of developing countries because despite the pervasiveness of the fraud, little
attention has been paid in the prior studies to these contexts (Kassem, 2014;Krambia-
Kapardis and Zopiatis, 2010).
Fraud triangle theory suggests that fraudoccurs only in the presence of perceived fraud
opportunity, a motivation, notably financial pressure and the justification of the fraud act
through rationalization processes (Cressey, 1950). A few studies extended this theory by
modifying the elements of the triangle while others introduced more macro-issues for fraud
occurrences, such as societal, cultural, industry, group and organisational influences
(Ramamoorti et al., 2009;Zahra et al., 2007;Wolfe and Hermanson, 2004;Kranacher et al.,
2011). Yet, other studies have questioned the role of some elements as inapplicable to some
fraudsters, such as predators as opposed to most accidental fraudsters (Dorminey et al.,
2012).
Few empirical studies have discussed fraud occurrences and deterrents in developing
economies. However, almost all of these studies have paid particular attention to isolated
cases of corruption or mismanagementin the public sector, leaving a majority of other forms
of fraud and other businesses unattended (Teh, 1997;Otusanya, 2012;Shehu, 2004). More
importantly, empirical studies on fraud in Tanzania are hardly found despite the
occurrences of scams, suchas BAE radar fraud, EPA, Tegeta escrow, DECI, TPA losses and
many others (Doyle, 2011;Hosken, 2009;Assad, 2011;Kapama, 2014;Kenyunko, 2013;
World Bank, 2012;SFO, 2012;BusinessTimes, 2010;Onyango, 2013;Kassem, 2014).
An important conclusion fromthese studies and fraud theories reveals complexity of the
factors for fraud occurrences and a mixed view regarding factors that are more relevant
than others. This problem is amplified by little research on businesses in developing
countries. The eventual problem for fraud-fighting professionals is lack of focus in their
efforts to combat fraud. In addition, it is yet to be known whether similar factors are
applicable in the context of businesses in Tanzania. Therefore, thisstudy examines specific
rationalizations and motivations as well as the occasions that facilitate the occurrences of
both employee and management fraud in business firms in Tanzania, thereby identifying
the possible deterrentsfor the containment of fraud.
The rest of the paper is organised as follows: Theoretical framework informing the
empirical analysis is provided in the second section. The third sectionprovides brief details
about the context of the study and the description of research methods. The findings of the
study are presented in the fourth section.The fifth section discusses the emerged findings in
the light of theoretical frameworkdeveloped earlier. Conclusion finalises the paper.
Literature review
Theoretical perspective
A myriad of theories have been put forwardto explain the occurrence of both employee and
management fraud in organisations. Among them, the fraud triangle is the foundation.
However, the paper also provides the criticswith extensions and modifications to the theory
and their contribution is incorporated when necessary. This theory, pioneered by Cressey
(1950), postulates that, “fraud occurs in the presence of perceived non-sharable financial
problem, presence of perceived opportunity and rationalizations that constitute
verbalisations to justify fraudaction in the mind of the fraudster”. According to this theory,
Employee and
management
fraud
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