Re-examining the fraud hexagon through corruption deterrence by regulatory undertakings and corporate disclosures in Nigerian financial institutions

Abstract

Purpose This study aims to explore the effectiveness of regulatory undertakings and corporate disclosures in deterring corruption within Nigerian financial institutions. This research contextualizes the findings using the fraud hexagon, which includes opportunity, pressure, rationalization, capability, arrogance and collusion as causative components of fraud. Design/methodology/approach A qualitative narrative methodology was used to examine various instances of fraudulent practices. This study analyzed regulatory policies such as the Bank Verification Number, the cashless economy policy, inter-agency strategic partnerships and corporate disclosure mechanisms, including technology-driven internal controls and anti-insider trading mandates. Findings The findings reveal that both regulatory undertakings and corporate disclosures can effectively deter fraud by addressing its causative factors. Specific measures such as transaction monitoring, stakeholder background checks and ethical training programs were identified as essential for mitigating fraud. Corporate disclosures, including policies on gifts, compliance units and annual reports quantifying economic losses due to fraud, were found to be critical in controlling fraud drivers within financial institutions. Research limitations/implications This study has some limitations. First, it focuses exclusively on financial institutions in Nigeria, leaving out public and non-profit sectors. The rationale is the financial sector’s heavy regulation, making anti-corruption disclosures more accessible. In addition, the fraud hexagon may not account for all fraud drivers, as it is not an exhaustive model. Despite these limitations, this research is pioneering in exploring corruption deterrence through regulatory undertakings and corporate disclosures in Nigeria, based on the fraud hexagon. Originality/value This study uniquely applies the fraud hexagon framework to examine corruption in Nigerian financial institutions, providing a comprehensive understanding of how regulatory and disclosure mechanisms can mitigate fraud. This research contributes to the existing literature by highlighting and offering practical recommendations for strengthening anticorruption efforts.