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THE IMPACT OF INFORMATION AND COMMUNICATION TECHNOLOGY (ICT) IN FRAUD DETECTION AND PREVENTION IN BANKING INDUSTRY

Project topic for Financial Studies department.

CHAPTER ONE

INTRODUCTION

Background of the Study

In the past, financial houses served as exclusive organization which provides long and shout-term funds to other organizations and individuals for a later impartment. But then, the major financial institution which are exclusively concerned with these short and long term capital needs were the banking institutions. Other financial institutions normally render only indirect assistant.

Fraud is perhaps the most fatal of all risks confronting banks. In the past, the enormity of bank fraud in Nigeria can be inferred form its value and volume. A good number of banks fraud may get reported to the appropriate authorities because of the personalities involved or because of concerns over the negative image effect that disclosure may cause if information is leaked to the banking public.

Banking in Nigeria in 20th century used to be cumbersome and seriously threatened by fraud. Some of the problems encountered in banking then were.

-  No accurate recording of transaction in the bank.

-   Account could not be accessed at any location.

-     Customers don’t have the ability to access their account ant any point in time.

-     Manual recording system through the use of ledger cash books was introduced.

- Banks reduced their working hours to enable them

balance their account on time. In addition introduced   tally numbers to

- Telephone and telegram were used a source of information, to sister branches for account statements. The present day business environment is very dynamic and has undergone drastic charges as a result of technological innovation, increased awareness and demands from customers. Business organizations especially the banking industry of the 21st century operators in a complex and competitive environment   and characterized by these changing conditions and highly unpredictable economic climate.

Information and communication technology (ICT) is at center of this global change curve. Landon (1991:205) centered that managers cannot ignore information system because they play a critical role in fraud detection and prevention. They point out that the entire cash flow of most fortune 500 companies are linked to information system.

            The application of information and communication technology concepts techniques, policies and implementation of strategies to banking services has become a subject of fundamental importance and concern to banking and indeed a source of detecting and preventing fraud. Harold and Jeff (1995:53) centered that information communication technology (ICT) affects how managers decide, how they plan and what products and services are offered in the banking industry. It has continued to change the way banks and their corporate relationships are organized world –wide and the variety of innovative devices available to enhance the control of fraud and offer speed and quality service delivery.

            The banking industry in Nigeria has witnessed tremendous charges in frauds detection and prevention linked with development of ICT over the years. The quest for survival, global relevance maintenance of exploitation, production of their customers interest of the many advantages of ICT through the use of automate devices imperative in the industry. This study evaluates the response of Nigeria Banks to this new trends and examination the extent to which they have adopted innovation of technology in their operation and the resultant effects in detecting and prevention of fraud.

Statement of Problem

Banking industry has been having problems

One of the problems has been inadequate and inaccurate records of transaction by bank due to limited number of staffs which consequently result as legal actions between the bank and customers.

The bank also could not offer Proper Avenue for account accessibility in other branches apart from where account is domicile making it extremely difficult for customers to operate their account in other locations.

It has been observed that so many people have been handling money and embezzlement of fraud in the business organization source of information as in first bank of Nigeria plc Okpara Avenue Enugu. Observation also shows that people prefer to handle or manage in a skilful way than their main salary which leads to the liquidation of the organization.

Another problem could be to determine the consequence of financial embezzlement in the banking industry which could lead to poor profit bases, retrenchment and bank distressed.

1.3 The Objectives of this Study Includes

To ascertain the consequences of fraud in business organization.

To determine how ICT can be used to prevent fraud.

To enquire whether ICT has an impact in fraud detection in Nigeria banking industry

To investigate position of banking before the introduction of ICT and its products.

1.4 Research Question

What is the banking situation before the introduction of ICT and its products?

What is the impact of ICT in fraud detection in Nigeria banking industry?

Can ICT be used to prevent fraud?

What are the consequences of fraud in business organization?

Hypothesis

Hypothesis 1

Ho:       Introduction of computer has no significant impact on fraud detection.

Hi:       Introduction of computer has significant impact on fraud detection.

Hypothesis 2

Ho:       ICT have not contributed significantly to fraud

            prevention.

H1:       ICT have not contributed significantly to fraud

            prevention.

Hypothesis 3

Ho:       Fraud has no negative impact on the Nigerian financial

            system.

Hi:       Fraud has negative impact on the Nigerian financial

            system.

Hypothesis 4

Ho:       Fraud in Nigeria can not be measured

Hi:       Fraud in Nigeria is in-Measurable

Significance of Study

The study of impact of communication technology in fraud detection and prevention in business organization would enable the researcher to obtain a certificate of B.sC in ESUT.

The study will be used as a secondary source of data for lecturers and students. The findings of this study will be of benefit in the banking industries.

Scope and Limitation of Study

This study covers information and communication technological management, a case of first bank of Nigeria plc.

Despite the interest and effort put in the study by the researcher, some problems were encountered in the course of the study.

DATA: There is scarcity of data collection because the topic is relatively new.

FUND: Due to limited fund, the researcher finds it difficult to finance the research project.

Definition of Terms

FRAUD: Criminal act of manipulation of fund.

ICT: Information communication technologies are facts discovered on the study of mechanical arts and applied science to modernize the flow  of information making and communication less problematic.

MICR: This means magnetically ink character recognition. This technology uses magnetically changeable ink or toner button of check in financial transaction documents used in Nigeria banking industries.

ELECTRONIC DATA INTERCHANGE: Is the structured transmission of data between organizations by electronic means.

LOCAL AREA NETWORK: A communication network that serves users within a confined geographical area. It is a network that connects computer and other devices in a relatively small are a wireless radio connection.

ATM: Automated teller Machine, an unattended electronic machine in public place, connected to a data system and related equipment. It is a device used by bank customers for banking transactions.

 WIDE AREA NETWORK: It is a geographical dispersed telecommunication network in large geographical area. A computer network that covers a broad area e.g. any network whose communication links across metropolitan region e.g. telephone users.

ELECTRONIC FUND TRANSFER: Is the transfer of money from one account to another by computer or initiated by electronic means.

POINT ON SALE SYSTEM: This keeps tracks of sales labour and payroll, and can operate records used in an accounting and book keeping. Also include computer monitor and cash drawer.





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