Compliance Blog

Sep 23, 2016
Categories: Accounts

Safeguarding Against Insider Fraud; NAFCU Regulatory Compliance Seminar

Written by Shari R. Pogach, Regulatory Paralegal

Insider fraud is the bane of any financial institution. I’ve provided you with a couple of case examples in previous posts here and here. So how does a credit union protect itself against insider fraud?  The September issue of The NCUA Report includes an article on what a credit union can do to discourage the possibility of fraud. 

The article notes it’s important that a credit union enact strong internal controls, make certain such controls are tailored to the credit union’s products and services, and controls cannot be internally overridden.  Two common internal controls are the member-account verification and the credit union’s annual audit.  Additional internal controls can include using an outside auditor or having periodic internal audits during the year done by an internal auditor or the supervisory committee.  The article also offers this list of common internal controls:

  • Dual controls;
  • Computer access controls;
  • Reviews of file maintenance reports;
  • Cash counts;
  • Surprise audits; and
  • Measures that prevent employees from accessing family member accounts.

According to NCUA, a credit union can also use the following to deter fraud:

  • Performing background checks before hiring employees;
  • Requiring employees to sign a fraud policy annually;
  • Conducting basic fraud awareness training;
  • Requiring mandatory vacations and having another employee perform the vacationing employee’s duties; and
  • Monitoring employees, including lifestyle and behavioral changes.

NCUA indicates it is important for the board of directors and supervisory committee to have continuous ongoing training in order to establish and maintain strong internal controls.   

The article also discusses how to report suspected fraud either through channels within the credit union or to NCUA through its fraud hotline. 

Insider fraud continues to rise and the cost of fraud to institutions also continues to increase.   Strong internal control safeguards are paramount to help detect and prevent against internal fraud.   


Seminar in New Orleans:  Our Regulatory Compliance Seminar is coming up next month in fun and fabulous New Orleans. I hope you’ll join us for the best credit union compliance training in the industry, in one of the best cities in the world! With their official motto of laissez les bons temps rouler – let the good times roll – you’re bound to have a great time exploring the city after class has ended. Check out some of their top restaurants and things to do. This popular event is almost sold out. Secure your seat today!