Financial industry security
: managing occupational fraud risk in South Korean banking institutions

  • Joon Bae Suh

Student thesis: Doctoral Thesis


Banking institutions within the financial system are very vulnerable to insider threats and require special security management because of the severe negative externalities to society once they fail. In this regard, the research aimed to investigate the characteristics of occupational fraud and to devise effective anti-fraud strategies by comparing two different financial sectors (commercial banks vs community banking institutions) in South Korean banking industry. For that, the study narrowed the scope of analysis in terms of two core banking services and focused on the three variables of interest: ‘gender’, ‘position’ of bankers, and ‘financial sector’ of banks. Adopting a mixed method approach, the study administered two different questionnaires to more than 450 participants and conducted 16 semi-structured interviews with the bankers and counter-fraud experts in the financial industry.
The study discovered evidence that ‘position’ and ‘sector’ play a more crucial role on occupational fraud than ‘gender’. ‘Position’ had a significant effect on the characteristics of fraud in a sense that perpetrators in high positions at financial institutions were significantly associated with corruption, which caused more serious damage to the organization. In a similar vein, the ‘financial sector’ had a significant effect on the perceived risk of fraud and counter-fraud effectiveness. That is, the respondents in the community banking institutions had significantly lower awareness of the problem and control effectiveness than those in the commercial banks.
Next, the study found important evidence that perceived ‘opportunity reduction’ was negatively associated with fraud occurrence in the banking industry. In addition, the study verified that the perception of an improved ethical culture was negatively associated with the frequency of occupational fraud. Simply put, if the bank employees agreed more that they had more elevated corporate culture, the frequency of occupational fraud was significantly lower in the institution. This implies that ‘reducing opportunity’ and ‘developing anti-fraud culture’ should be two axial measures when managing the risk of occupational fraud at financial institutions.
Finally, a new counter-fraud model and a devised strategy were proposed based on the findings of the study, which encompasses comprehensive problem-oriented methods to manage occupational fraud risk in South Korean banking institutions.
Date of AwardApr 2018
Original languageEnglish
SupervisorMark Button (Supervisor) & Richard Kapend (Supervisor)

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