Agency banking is a fairly new model in Kenya which has attracted attention from researchers because of its contribution towards financial inclusion. Fraud has been identified as one of the challenges in agency banking but it is not clear which fraud risk management practices are adopted in agency banking. This prompted the need to investigate these practices, their effect on level of activity by agent banks and to establish whether there is any association between fraud and agent banks characteristics. This was a descriptive and explanatory study targeting agent banks in Nairobi County. A random sampling method and a structured questionnaire were applied in sample selection and data collection respectively. Descriptive and inferential statistics were used for data analysis. With regard to the first objective, the study found that age of the business had a high positive significant relationship with split deposits and a negative one with identity theft. Proximity to bank branches had a positive correlation with unauthorised access of agent transactional data and fake ATMs but showed a negative relationship with unauthorized customer charges. Unauthorized PIN access showed a positive correlation with acting for multiple banks. Location had a correlation with registration of customers with fake details and extortion. In terms of the second objective, the findings revealed that the risk management practices which are effectively adopted in agent banks are Governance and leadership, preventive and detective. Monitoring and response practices scored poorly in terms of effectiveness. The third objective revealed that preventive, detective and monitoring practices have a statistically significant relationship with level of activity. These findings should be of interest to regulators, banks and bank agents in curbing fraud and improving performance by agent banks.