The number of credit unions impacted by fraud is on the rise due to a variety of factors. In response to this increased activity, there is renewed emphasis for oversight responsibilities of audit and/or supervisory committee members. Additionally, management’s responsibility and strength of internal controls is under the microscope. Committee members should be assessing corporate culture to detect and deter unethical behavior in their organizations.
Committee members must be able to assess risk and address a complex regulatory environment. It is important for committee members to be prepared, informed, and engaged.
The culture and tone in the credit union, from the top down, is extremely important and contributes to minimizing rationalization for committing a fraud. Credit union management is responsible for establishing a culture of integrity and ethical behavior. By walking the walk and having a zero-tolerance policy, the incentive or motivation for employees to commit fraud is greatly reduced.
Regardless of the strength of the employee’s incentive to commit fraud, it can only take place if the opportunity is present. The most common internal fraud schemes arise from weak internal controls or when internal controls are not a priority of the credit union. Therefore, it is critical to have segregation of duties, clear job responsibilities, and dual control procedures.
No matter the size of the credit union, it is imperative to develop proper “checks and balances.” Removing the opportunity for fraud and implementing robust internal controls will mitigate the chances of fraud occurring at the credit union. Do you think your credit union is immune from fraud?