Although the NCUA recently announced it is developing new exam procedures to improve the identification of fraud risk indicators, especially at small institutions, experts agree fighting fraud requires a team effort that includes active boards, strong supervisory committees and stiff internal controls.

“Weak internal controls provide a breeding ground for substantial losses or even failure,” C. Keith Morton, NCUA Region IV director, wrote in an article for Cornerstone Credit Union League earlier this year. “Record-keeping problems, out-of-balance conditions, overdue audits or member account verifications, and manipulated records create a dangerous environment for fraud to take root and go undiscovered. It may be only one person who commits the fraud, but lax management oversight, along with a failure of the supervisory committee to perform its vital functions, may allow this individual to embezzle for months, if not years.”

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