Abstract

Recently, banks have relied heavily on automated systems and the transfer of electronic funds for much of their business operations. Information technology has dramatically ensured that organisations are more effectively integrated.

The goal of this study is to analyse the effect of IT on fraud occurrences within a commercial financial institution.

Specifically, the study sought to examine the effect of the use of Accounting and Banking software applications on Fraud occurrence, evaluate the effect of Electronic banking on fraud occurrences and to analyze the effect of online account access and feedback on fraud in a commercial financial institution in Buea City.

The study was conducted at PRES Microfinance Buea. The research design was quantitative in nature whereby the researcher structured a questionnaire and simple random sampling techniques to sample 50 employees from microfinance. Collected data was analyzed using SPSS 21.0 where descriptive statistics and inferential statistics such as correlation was used to test the hypotheses.

The results revealed that some banking and application software’s systems are used to cover up crimes, some are prone to hacking and facilitate fraudulent accounting activities such as recording fictitious transactions and preparing inadequate financial transactions.

Embezzlement using wireless transfer or account takeover, criminals fraudulent online applications can be submitted for bank loans or criminals may disrupt e-commerce by participating in service denial attacks were the major effect of electronic banking on fraud occurrence.

The study also revealed that loss of income, loss of client trust, loss of reputation, loss of public confidence in the bank, which increases the operational cost for the bank were limitations of online account access and feedback on fraud occurrence. It was suggested that banks should provide enough internal controls measures to prevent, detect and correct computer fraud and other related concerns.

CHAPTER ONE

GENERAL INTRODUCTION

Introduction

This chapter provides the research with an overview of the study’s context, describing the problem and intent, defining the scope, listing the aims, questions and hypotheses that drive this study, as well as suggesting the study’s significance.. This chapter closes with the research organization stating how the various chapters will be organised.

1.1 Background to the study

In the 21st century, the financial institutions have expanded in a great way as a bank account has become a necessity for any transaction ranging from payment of comodities.

Both employers and employees have scrapped the archaic methods of doing things and are incorporating ICT related techniques in carrying out daily transactions(Charlton & Taylor, 2004)

“…..Increasing computerization, particularly in deposit money management, account balancing and stock-keeping, in the field of electronic money transfer systems and in the private sector, as well as in new computer applications such as electronic home banking, electronic mail and other IT systems will lead to increase in the number of offences and losses…..”

The assertion was made by (Sieber,2006) and in more than two decades since it was made, it has been proved very correct.

 

Thanks to globalization, the world is gradually shrinking and organisations and businesses are finding it much easier to go about their business activities.

The rapidly expanding pace of globalization, driven by factors such as establishment of the World Trade Organisation (WTO) and subsequent lowering of market and competition barriers, has led to increased capital mobility and increased ability of financial services agencies to meet the needs of individuals and companies around the world (Busch, 2009).

However, the increasing rate of globalization, combined with the Technology expansion and other variables have also increased the rate of fraud and new fraud operations (Zagaris, 2010) Due to their technical complexity, these fresh fraud opportunities can also be extremely difficult to detect; thus, banks can spend considerable resources attempting to identify frauds and combat them (Kranacher & Wells, 2011).

In detecting fraud and preventing fraud, banks face challenges and these difficulties can also be compounded by the political, regulatory and institutional systems in place.

The most influential sector to benefit from this large emerging market in the Internet economy is banking and allied services. The rapid transition is very evident in conventional banking services. Electronic banking services are encouraged in the form of e-transfer and the withdrawal of large quantities of money.

This makes the wider scale of Automated TellerMachines simpler to use. Other manufacturers of electronic banking; Smart Cards andInternet lending e-banking are also becoming popular (Awad, 1988).

The information and telecommunications industry has proven to be a big driver of the industry; an effort to transform the economy into an Internet economy. Over the last few years, sophisticated Internet networks in banks have played an important role in facilitating Cameroon’s (Adekunle & Tella, 2008) further identified another factor that propelled the digital economy in Cameroon as the commitments of most tertiary academic institutions into the Internet economy in the form of competitive online degrees and Internet advertisements.

Consequently, most financial institutions and their customers are encouraged to make use of Internet facilities. The use of GSM technology has been adopted by a large proportion of the population to facilitate business transactions.

Another factor that propelled the digital economy in Cameroon as the commitments of most tertiary academic institutions in the digital economy was further established in the form of competitive online degrees  and internet advertising. As a result, most financial institutions and their clientele are allowed to use internet services (Adekunle & Tella, 2008).

Internet usage in Africa at large and Nigeria in particular shows impressive statistics as computers, cell phones and Internet is concerned. These very high Over the coming years, internet penetration is predicted to grow phenomenally.

According to Seetharaman et al, (2006) however, there is a paradox that the advancement of computer technology in companies has dramatically increased individuals’ potential to defraud. Several observers (for instance, the Audit Committee,1987) noted that prospects for abuse of ICT continue to grow in line with technological change.

For various reasons, many fraud cases are unreported; thus, the amount of damages incurred can only be estimated. With regard to the effects on banks and banking industries, (Nwankwo, 1991) said that fraud is the biggest single cause of bank failure, while (Adewumi, 2004) suggested that fraud is capable of damaging the banking habit of any economy. Therefore, except for the fraudsters themselves, fraud is hated by all banking stakeholders.

In Cameroon many financial have in certain aspects of their operations, embraced the use of computers, such as tracking daily collections, recording consumer savings (account details), planning and delivering their year-end financial reports, etc.

With the collapse of CONFINEST, a major microfinance institution in Cameroon, many Cameroonian financial institutions have shifted their operating systems from manuals to computer-based systems with the introduction of ICT packages.

Due to its inter-sectional linkage, financial institutions in Cameroon have embraced and are applying ICT in almost all areas of their operations as can be seen from its extension to almost all aspects of its operations, such as: the use of debit and credit cards, inter-regional money transfer, the use of computerized accounting systems in debit and credit cards, as well as inter-regional money transfer.

1.2 Problem statement

The adoption of Information Technology by Commercial Financial Institutions in Buea has given birth to advanced business models, advanced trade opportunities, innovative markets, and adaptive ways of rendering services to clients and equally more adequate delivery channels.

On the other hand, fraud associated with information technology within commercial financial institutions has grown rapidly in the last few years with the adoption of new technologies (Idowu, Alu, &Adagunodo, 2002).

 

As technology advances, we are seeing a distinct proliferation of more complex fraud schemes. As money becomes more digital, there is increasing concern surrounding the vulnerability of cloud-based applications.

The double-edged sword of information technology gets sharper (Mueller, 2015). It is for this reason that this study aims at establishing a model to explain the effect of the adoption of information technologyon fraud occurrences in a commercial financial institution in Buea City Case study: PresMfi Ltd.

1.3 General Research Objective

The general research objective is;

To analyse the effect of information technology on fraud occurrences within a commercial financial institution

Specific objectives include;

1. To examine the effect of the use of Accounting and Banking software applications on Fraud occurrence in a commercial financial institution in Buea City
2. To evaluate the effect of Electronic banking on fraud occurrences in a commercial financial institution in Buea City.
3. To analyze the effect of online account access and feedback on fraud in a commercial financial institution in Buea City.

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