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Internal Fraud in Financial Institutions—Self Interest Issues

Fighting fraud anywhere is a challenge, and the risk of internal fraud in financial institutions is no exception. Three examples of internal fraud in financial institutions:

The above three examples highlight the risk of internal fraud in financial institutions. Without question, the risk to these crimes is indisputable.

Unfortunately, many of those in charge try to explain away failures by citing obvious flaws in separation of duties and insufficient experience in supervisory committees, especially those in smaller credit unions.

Internal fraud in financial institutions can be minimized by taking the following actions:

1) Acknowledge the Threat: Internal fraud in financial institutions is a real possibility. The employee most likely to commit internal fraud in financial institutions usually holds a position of trust, has greatest opportunity, is least suspected, and has little or no supervisory oversight.

2) New-Hire Process: Controlling internal fraud in financial institutions must begin at the point of hire. Reduce this risk by conducting comprehensive background and credit checks.

3) Multiple Tasking: Those three cases cited above prove that no single employee should have the ability to affect every stage of a critical work process.

4) Awareness: Supervisors must be educated in what to look for when it comes to preventing internal fraud in financial institutions. They must also ensure that adequate internal controls and proper monitoring strategies are in place.

The above “four steps” will help to deter internal fraud in financial institutions.

Read more about ways to prevent internal fraud in financial institutions by ordering your copy of Business Fraud: From Trust to Betrayal now!