The NCUA told Credit Union Times this week that it iscurrently developing new exam procedures to improve theidentification of fraud risk indicators, especially at smallinstitutions.

The move comes after the regulator opted last year to reduce theamount of time it spends on-site conducting exams to 40 hours forqualified credit unions with assets fewer than $10 million and aCAMEL rating of three or better

Public Affairs Specialist John Fairbanks said the NCUA expectsto roll out the new exam procedures in 2014. The move follows aseries of creditunion embezzlements, including the $10 million case againstTaupa Lithuanian CU CEO AlexSpirikaitis.

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“We believe an enhanced examination procedure designed to focusin on high fraud risk areas combined with training on the newprocedures is a key step to mitigate risk,” Fairbanks said.

The NCUA is in the process of re-structuring its exam approachand tailoring exams according to the varying risk characteristicsof credit unions based on size and sophistication, includingenhanced fraud detection techniques in smaller institutions.

“Staff training is currently underway on the enhanced examprocedures for small credit unions,” Fairbanks said. “Thoseprocedures include enhanced procedures to help detect fraudearlier. The exam process is not a fraud exam but with enhancedprocedures, we expect to improve early detection. All staff will betrained on these procedures and they can be applied in allsituations where fraud is a concern, but are especially targetedfor small institutions.”

The NCUA already has procedures in place to continuously improvethe monitoring and exam process, he said.

“We learn from every incidence of fraud and make appropriateadjustments,” the agency spokesman added. “The NCUA continuouslyre-evaluates our ongoing monitoring to include enhanced analysis toidentify irregularities where appropriate.

“We also moved to an annual exam cycle, which puts examinerson-site at federal credit unions more frequently. This will alsohelp to reduce the size of fraud and possibly detect fraudearlier.”

The NCUA is also evaluating approaches toward establishing aspecialist team for the most significant fraud risks, the agencysaid.

“In the meantime, it's important to remember that localoversight is important,” Fairbanks said. “Management, directors andsupervisory committee members can take steps to deter and detectfraud.”

For example, the NCUA's Office of Small Credit Union Initiativeswill present a webinar on “Deterring Employee Fraud” at 2 p.m. ESTon Thursday, Nov. 14.

Presenters including OSCUI staff along with Joni Lovingood, asenior consultant with CUNA Mutual Group, and Scott Butterfield ofYour Credit Union Partner, will cover topics such as why employeefraud occurs, its warning signs and impact on the credit union.

“Using real-world case studies, Lovingood and Butterfield willalso explain how a well-trained, active supervisory committee andstrong internal controls are effective means of deterring employeefraud,” the NCUA said Tuesday in its announcement.

Registration is open online.