NEW YORK-Credit unions are becoming more susceptible to emerging loss exposures that can cause immediate losses or result in third-party claims, litigation and subsequent losses, according to one CUNA Mutual Group executive.
Roger Nettie, senior risk management consultant, told America's Credit Union Conference that CUs face a two-pronged loss threat-by fraudulent acts committed directly against the institution and through litigation by third parties.
Nettie cited a 2012 Global Fraud Study conducted by the Association of Certified Fraud Examiners that found employee frauds lasted a median of 18 months before detection, with a median loss of $140,000. The study showed more than one-fifth of these caused losses of at least $1 million.
"The longer a perpetrator works for an organization, the higher fraud losses tend to be," Nettie said. "CUNA Mutual Group claims records show that over a five-year period, employee dishonesty represented just 13% of fraud claims, but 45% of fraud losses."
Another growing area of direct losses is wire fraud, especially from HELOC accounts, with credit unions reporting more than $25 million in losses from 2007 to 2012. The average reported loss in 2012 was $175,000, with some approaching $1 million. "Credit unions experiencing losses generally had inadequate security for large dollar transfers, enabling crooks to easily defeat callback security measures," Nettie said.
As a result, CUNA Mutual Group has implemented new terms with it funds transfer coverage to encourage additional controls for remote requests, and discourage the practice of accepting large-dollar remote requests. Nettie offered a number of recommendations to limit wire fraud, such as spotting fraud red flags and using layered levels of security.
