August 22, 2014
By Bob Coleman
Editor, Coleman Report
While the article is targeted to credit union management, the takeaways for combatting internal loan fraud are universal.
The most common form of embezzlement involves booking fictitious loans.
Red flags for fraudulent loan files include:
1) Change of address to a post office box.
2) Change of address to the lender’s own address.
3) Payment due dates more than 60 days in the future.
4) Loans not reported as delinquent, but the original and current loan balances are approximately the same.
Indicators of illegal activity include:
1) Manual posting of loan payments.
2) Significant transfers between accounts.
Here are employee red flags:
1) Attitude change in an employee.
2) Not taking a vacation.
3) Overly complicated transactions.
4) Records are in disarray.
5) Claiming permission by a borrower to transfer funds and make payments.
6) Employee lifestyle change.
7) Excessive borrowing or spending.
The final takeaway?
“Sadly, criminals are often long-term, once-trusted employees.”