What Can Credit Unions Do to Prevent Fraud?
by Amy Kleinschmit
Chief Compliance Officer

Preventing Credit Union Fraud. Internal controls and fraud prevention are important for the credit union’s safety and soundness. Credit unions need to have a system of internal controls and take steps to detect and prevent fraud. Credit unions should also ensure that the internal controls cannot be overridden. In addition to member-account verification and the annual audit, additional internal controls include, but are not limited to: dual controls, computer access controls; reviews of file maintenance reports; and surprise audits.

The National Credit Union Administration (NCUA) has a telephone line established solely for the reporting of suspicious or illegal activity committed by credit union employees, members, or officials in federally insured credit unions.

Call toll-free 800.827.9650Credit union are encouraged to post the NCUA Fraud Hotline in the credit union breakroom and share it with all staff AND volunteers.

Callers can remain anonymous, however, enough information must be given so that the problem, the individual(s) and credit union involved can be identified. In some cases, failure to identify yourself may make the report difficult to investigate. All reports are kept confidential.

When you contact the NCUA Fraud Hotline, a report is completed by the Office of General Counsel based on the information provided and forwarded immediately to the appropriate regional office. An investigation or inquiry into the allegations is conducted. In the event information provided to the hotline results in a finding of fraudulent or improper conduct, NCUA will take the necessary corrective action.

The NCUA discussed steps credit unions can take to deter fraud in their September 2016 NCUA Report. In addition to strong internal controls, other actions that a credit union can take to deter fraud include:

  • 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.

There are a number of additional resources available at the link above from the NCUA, including a series of webinars from the NCUA on Deterring, Preventing & Detecting Employee Dishonestly which can be found here.


CUAD members may contact Amy Kleinschmit with any compliance related questions. 


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