Fraud risk refers to the potential for financial loss or damage resulting from deceptive practices aimed at gaining an unfair advantage or illegally obtaining money, assets, or services. This risk can arise from various sources, including employee misconduct, external scams, identity theft, or financial statement manipulation. Organizations may face significant losses, regulatory penalties, and reputational harm due to fraud. Effective management involves implementing strong internal controls, conducting regular audits, providing employee training on fraud awareness, and establishing a clear reporting mechanism for suspicious activities to detect and prevent fraudulent actions.

Basel scope:

• Pillar 1
• Pillar 2

Capital requirements:

Mitigated by Capital

Related Links:

•       Basel Framework