The moderating effect of capability fraud element on fraud prevention in the Domicile/Local Saudi Arabian retail banking sector

The rapid increase in fraud nowadays has affected the economies of both developed and developing countries. Fraud has led to big losses, thus affecting many banks in the world including those in Saudi Arabia. Hence, this study investigates the moderating
effect of capability fraud element on fraud prevention and industry factors in the Saudi Arabian banking sector. The framework of this study was developed from Fraud Diamond Theory and the knowledge management model. In this study, customers knowledge, internal control, insider involvement, information sharing, legal and regulation (independent variable) with the capability element of fraud are the factors used to explain or that affect the prevention of fraud. Proportional sampling technique
was used to select the respondents for the study and questionnaires were distributed to the bank employees of 12 Saudi banks, resulting in 328 completed questionnaires, making up 77.3% response rate. Meanwhile, hypotheses tests were done by PLE-SEM 3.2.7 version. The result have confirms a significant positive relationship between fraud prevention and customers’ knowledge, information sharing, insider’s involvement, internal control, and legal & regulation. However, customer knowledge, information
sharing, and insider’s involvement have no significant relationship to strengthen capability element of fraud as moderator to fraud prevention. The findings also confirm that capability element of fraud plays a significant role in moderating the relationship
between the two factors namely, internal control, and legal & regulation and fraud prevention, while other variables were found to be insignificant to explain fraud prevention. Besides, there is important insights to managers, CEOs, policy makers, banking regulatory authorities, financial institutions, and researchers to consider the use of fraud prevention in improving the banking sector in Saudi Arabia.