In its 2016 annual report, the$2.8 billion Municipal Credit Union touted how its Internal AuditDepartment conducted more than 50 integrated audits in the creditunion's divisions of operations, compliance, IT and finance, andcontinuously audited the most sensitive areas of New York's largestcredit union by members.

Presumably, those audits included a review and testing ofinternal controls to detect and prevent internal fraud. Butindustry experts said those internal controls obviously broke downbecause of a serious lack of oversight by key personnel, thesupervisory committee and the board of directors, which led to amultimillion-dollar fraud scandal by its CEO. While theconsequences of this fraud case will have a lasting impact on MCU,industry experts offered insights about how executives may preventsimilar circumstances from happening at their credit union.

Federal prosecutors alleged that Kam Wong, MCU's president/CEOfor 11 years, stole millions of dollars from the credit unionthrough various fraudulent schemes between 2013 and 2018, and spent$3.5 million of the money on New York lottery tickets. A criminalcomplaint, based on the findings of a federal investigation, wasfiled in Manhattan's federal court on May 8 and alleges that the62-year-old Wong committed fraud, embezzlement and aggravatedidentify theft.