Stopping fraud in its tracks
June 13, 2017 12:44 PM
Charles Wolertz/wollertz - Fotolia
What are CUs doing to stop fraud?
Fraud at financial institutions may have declined last year , but it generates big headlines when it does occur. During the Michigan Credit Union League's Annual Conference & Exposition recently in Grand Rapids, Mich., Credit Union Journal asked CU representatives what their institutions are doing to tackle internal and external fraud.
Nick Montie, CEO of Thunder Bay Area CU, Alpena, Mich.
For external fraud, we've been doing membership education. We've had articles in our newsletter [and] posted things on our Facebook page just trying to bring awareness to it. With staff it's education; constantly teaching them what to do when a member calls and how to handle the situation so they can educate members. We're probably getting a dozen fraud calls a week now. Credit card write-offs are probably the single biggest loss we've experienced.
Pete Dzuris, CEO of Northland Area FCU, Oscoda, Mich.
Segregation of duties is essential. Some of the biggest problems some of the smaller credit unions have experienced comes from lack of segregation of duties -- where some of the same people wear the same hats and operationally speaking there's not segregation between parties -- and that can lead to problems.
The other thing is internal audits within the organization and on the outside of the organization as well. For instance, we have an internal auditor and we also have a supervisory committee. Both of those parties have no responsibilities, operationally speaking, and they have access to anything and everything in the organization in order to properly evaluate it to make sure fraud does not occur. It doesn't guarantee that it couldn't happen but it's more likely to be caught because those individuals would have the right to see, find and identify it.
Third, the use of third parties on the outside of the organization. When I first started in my organization we had agreed-upon procedures, which is not the same as having a full audit. We immediately switched to a full audit because I wanted that assurance. I'm satisfied with where we are as an organization
The other thing is internal audits within the organization and on the outside of the organization as well. For instance, we have an internal auditor and we also have a supervisory committee. Both of those parties have no responsibilities, operationally speaking, and they have access to anything and everything in the organization in order to properly evaluate it to make sure fraud does not occur. It doesn't guarantee that it couldn't happen but it's more likely to be caught because those individuals would have the right to see, find and identify it.
Third, the use of third parties on the outside of the organization. When I first started in my organization we had agreed-upon procedures, which is not the same as having a full audit. We immediately switched to a full audit because I wanted that assurance. I'm satisfied with where we are as an organization
Cindy Krentz, CEO of HPC CU, Alpena, Mich.
We've taken steps as far as working with a professional IT person to look at our internal security and external security. Other than that, We've made significant changes within the last year and we're 95 percent where we need to be. I think it's going to be an ongoing thing; We still have some work to do, but everybody needs to be diligent in that area.
Patty Campbell, CEO of Christian Financial CU, Roseville, Mich.
It's a constant evaluation of the vendors you use and the tools you have. Fraud evolves; we've always had fraud but the form in which it presents itself evolves based on the tools that are there and the delivery channels that are there. We trust the partners we have but we always evaluate those partners as we evaluate all of our internal systems.
Scott Pauly, CEO of Awakon FCU, Saginaw, Mich.
We're educating our staff more intentionally to address membership's unawareness. They just don't know how to respond to scams, so we're looking at doing online and one-on-one education sessions with our staff or with groups in our local communities to be able to educate them how to protect themselves.
