Fraud a Growing Risk for Credit Unions

August 3, 2016

Credit Union Times has released a new white paper discussing the results of their recent online survey and expert opinions on fraud. Titled Standing Up to Fraud: How Credit Unions Mitigate the Threat Landscape, the paper provides some interesting insights:

  • Nearly 59% of those surveyed thought that their internal controls were adequate
  • Over 78% said that employees were trained annually or quarterly on internal fraud controls
  • More than half of those surveyed said they continuously review internal control processes and take steps to improve them

But despite all of the reported internal controls and training, fraud and the risk of fraud is still a major concern for those in the credit union industry.

According to the survey, fraudulent credit and debit card use was the most common culprit of fraud at credit unions. Data breaches ranked second, while internal fraud came third.

Internal fraud controls is the top tactic used by credit unions to prevent fraud; however, this doesn’t appear to be enough. Another article in the Credit Union Times reported that fraud was the cause of 11 out of the 15 small credit union closures last year, and has also cost the National Credit Union Share Insurance Fund (NCUSIF) millions in total losses.

Credit unions are not the only ones feeling the effects of fraud. According to our Global Benchmark – Role of Data Analytics for Internal Fraud Detection, followed by the communications, technology and entertainment, financial services is the top industry that has seen more internal fraud risks.

A PwC survey found that internal fraud in these and other industries is typically committed by junior staff and middle management using complex products that are difficult to police.

So what can be done? According to the Chartered Global Management Accountant (CGMA) in their good practice guide for fraud risk management, computer-based controls are playing a bigger role in fraud detection.

Tools and techniques include identifying anomalies with software that does real-time transaction assessment, targeted post-transactional review, or strategic analysis of management accounts. Exception reporting also can be a helpful tool in immediately identifying transactions or results that are outside expected normal results.

About Anu Sood 

Anu Sood (LinkedIn | Twitter) is the Director Marketing at CaseWare RCM and is responsible for the company’s global marketing strategy. She has over 20 years of experience in product development, product management, product marketing, corporate communications, demand generation, content marketing and strategic marketing in high-tech industries.

Try Alessa