Fraud Fuels Reputation Risk
It’s been about a year since two employees at the $1.6 million Enterprise Credit Union pleaded guilty to embezzling almost $1 million over a period of 10 years, but the topic still fuels the gossip mill in the small Kansas town. And, according to one prominent resident, the incident reduced residents’ trust in the credit union industry and regulators.
“Everyone in town wonders how that much money could go missing over so many years without someone noticing it sooner,” said Tom Decker, who for many years was mayor of the 855-resident town.
According to Marquet’s most recent report released in May, nearly one in four major embezzlement schemes last year in financial institutions involved credit unions.
The failed El Paso FCU is one example of examiners not paying close enough attention to a small credit union, according to a recent report by NCUA Inspector General James Hagen wrote that NCUA examiners could have reduced losses to the share insurance fund by doing a better job of identifying and following up on fraud risk factors.