MADISON, Wis.-Experts interviewed about strategies for preventing internal fraud recommended a number of steps-some more commonly used than others-to augment fraud protection procedures at credit unions.
The following steps were recommended by risk management staff at CUNA Mutual Group, state regulators and independent credit union auditors.
*Due-diligence during the hiring process, including verifying all references and performing a full background check.
*Establish a top-down culture (beginning with the board) that the institution has a zero tolerance policy for fraud or internal theft. A detailed fraud policy is also crucial, including a list of examples of behaviors that will not be tolerated, said CUNA Mutual's Joette Colletts, Employees should be required to review and sign the fraud policy on an annual basis.
*Perform a file maintenance report each year outlining any non-financial transactions at the credit union, such as advancing due dates on loan payments.
*Separation of duties, including requiring dual controls on procedures, particularly those involving cash.
*Surprise cash counts.
*Establish a whistleblower policy guaranteeing that incidents will be properly investigated and that employees who come forward with information will not face retaliatory action.
*Require that all employees take at least one full week of vacation each year.
*At the board level, verify all documents presented by executive staff, no matter how much the board may trust that person.
*Watch for employee actions such as consistently staying late, not taking vacations and other behaviors.
