The NAFCU Journal May - June 2019 - 28

The Costs of Internal Fraud Go
Beyond Cash

The ACFE study found the median
reported dollar cost of internal fraud in
financial institutions to be $200,000, and
these losses are likely to be covered by
insurance. But hard dollar costs are only
part of the picture.

Sabrina Waner, senior vice president
and chief financial officer at Allegiance
Credit Union in Oklahoma City, points
out the burden on staff time that gathering information and evidence of internal fraud can have, especially for small
credit unions. There were two cases of
internal fraud while she was working
at a previous credit union. Because
they were small - the staff numbered
between seven and 14 when the two
fraud cases happened - and she was a
vice president who was responsible for
the accounting functions, much of the
burden of documentation fell on her
shoulders. "We weren't big enough to
hire an auditor or an audit firm to come
in and pull all that information," she says.
"I spent a year of my life making sure we
had documentation of every transaction,
every piece of paper and every policy,
then going through the trial and testifying in court."
Ryan Ross, senior vice president and
chief risk officer at Pen Air Federal Credit
Union in Pensacola, Fla., had a similar
experience with one fraud case in which
a staff member was skimming off the top
of cash shipments. In this case, it took
a year and a half of working with the
local district attorney and the FBI to get
the case to court. "The time I put in just
myself, pulling video footage and working
with the FBI to see where she was in the
branch and see if we could catch her
doing it, [was substantial]," he says.
Additionally, credit unions may suffer
reputational loss. "When you start
reporting things to law enforcement
and regulators, that becomes public
record," says Jon Crawford, security
manager at Apple Federal Credit
Union in Fairfax, Va. And in cases
involving large sums of money or
senior staff, local media can find a
28

refreshing take to an interesting story
whenever there is a new development
in that long investigation timeline.
This can be an ongoing issue, repelling new members until the story
blows over. To combat this potential
risk, give your credit union spokesperson information they can discuss
with media that underscores how the
credit union's policies, procedures and
internal auditing helped them find this
internal fraud. It also helps to highlight
relationships with law enforcement to
protect member assets and prosecute
anyone who commits fraud. Prosecution of employees who commit fraud,
says Crawford, "sends a message
that fraud will not be tolerated and

''

the assets of the members of Apple
Federal Credit Union will be protected
at all costs."

Strong Policies Are Critical

Internal auditing and policies and
procedures help prevent and uncover
internal fraud.
Two of the most important, according
to Michael J. Carroll, assistant vice
president of internal audit at Apple
Federal Credit Union, are dual control
and segregation of duties. "As long as
you're segregating duties properly, it's
going to make it very difficult for one
employee to complete a fraudulent
transaction from beginning to end."

We count cash at the
end of shifts and do surprise
cash counts.

''

- SABRINA WANER, SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER, ALLEGIANCE CREDIT UNION

THE NAFCU JOURNAL  MAY-JUNE 2019



The NAFCU Journal May - June 2019

Table of Contents for the Digital Edition of The NAFCU Journal May - June 2019

The NAFCU Journal May - June 2019
Contents
Conferences
From the Chair
Washington and Industry Briefs
The Bottom Line
Welcome, New Members
Knowledge Is Power Credit unions leverage data and analytics for strategic business growth.
Lowering the High Cost of Internal Fraud Policies, culture and training work together to improve fraud detection and prevention.
2019 Annual Conference Exhibitor Directory
Executive Spotlight
Management Insight
Compliance Central
Inside NAFCU Services
From the President’s Desk
The NAFCU Journal May - June 2019 - The NAFCU Journal May - June 2019
The NAFCU Journal May - June 2019 - Cover2
The NAFCU Journal May - June 2019 - Contents
The NAFCU Journal May - June 2019 - 2
The NAFCU Journal May - June 2019 - Conferences
The NAFCU Journal May - June 2019 - From the Chair
The NAFCU Journal May - June 2019 - 5
The NAFCU Journal May - June 2019 - Washington and Industry Briefs
The NAFCU Journal May - June 2019 - 7
The NAFCU Journal May - June 2019 - The Bottom Line
The NAFCU Journal May - June 2019 - 9
The NAFCU Journal May - June 2019 - 10
The NAFCU Journal May - June 2019 - 11
The NAFCU Journal May - June 2019 - Welcome, New Members
The NAFCU Journal May - June 2019 - 13
The NAFCU Journal May - June 2019 - 14
The NAFCU Journal May - June 2019 - 15
The NAFCU Journal May - June 2019 - 16
The NAFCU Journal May - June 2019 - 17
The NAFCU Journal May - June 2019 - Knowledge Is Power Credit unions leverage data and analytics for strategic business growth.
The NAFCU Journal May - June 2019 - 19
The NAFCU Journal May - June 2019 - 20
The NAFCU Journal May - June 2019 - 21
The NAFCU Journal May - June 2019 - 22
The NAFCU Journal May - June 2019 - 23
The NAFCU Journal May - June 2019 - 24
The NAFCU Journal May - June 2019 - 25
The NAFCU Journal May - June 2019 - Lowering the High Cost of Internal Fraud Policies, culture and training work together to improve fraud detection and prevention.
The NAFCU Journal May - June 2019 - 27
The NAFCU Journal May - June 2019 - 28
The NAFCU Journal May - June 2019 - 29
The NAFCU Journal May - June 2019 - 30
The NAFCU Journal May - June 2019 - 31
The NAFCU Journal May - June 2019 - 32
The NAFCU Journal May - June 2019 - 33
The NAFCU Journal May - June 2019 - 34
The NAFCU Journal May - June 2019 - 2019 Annual Conference Exhibitor Directory
The NAFCU Journal May - June 2019 - 36
The NAFCU Journal May - June 2019 - 37
The NAFCU Journal May - June 2019 - 38
The NAFCU Journal May - June 2019 - 39
The NAFCU Journal May - June 2019 - 40
The NAFCU Journal May - June 2019 - 41
The NAFCU Journal May - June 2019 - Executive Spotlight
The NAFCU Journal May - June 2019 - 43
The NAFCU Journal May - June 2019 - 44
The NAFCU Journal May - June 2019 - 45
The NAFCU Journal May - June 2019 - Management Insight
The NAFCU Journal May - June 2019 - 47
The NAFCU Journal May - June 2019 - Compliance Central
The NAFCU Journal May - June 2019 - 49
The NAFCU Journal May - June 2019 - Inside NAFCU Services
The NAFCU Journal May - June 2019 - 51
The NAFCU Journal May - June 2019 - From the President’s Desk
The NAFCU Journal May - June 2019 - Cover3
The NAFCU Journal May - June 2019 - Cover4
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