"They do a good job," he stated. "On the other hand, their employees are drawn from the same population as everybody else. Try as hard as they might, because there's a certain amount of turnover, they do end up in situations where an employee is bad to begin with or is tempted to become bad because of circumstances and opportunity."

What's more, the authors point out it's not just the unproven new hire who poses a risk. Actually, Inscoe and Krishna note, as employees rise in the organization, they're often given more trust while, at the same time, their opportunity to commit major fraud increases.

"The unfortunate stereotype is the teller taking money out of the till," Krishna said. "Certainly that's something to watch out for. But it's the branch manager who might be abusing his power to open accounts. Even people in loss-prevention jobs have committed fraud. The higher up you go the easier it is to bypass controls and the greater the sense of entitlement and trust."

Then, when employee fraud does hit a credit union, the impact is likely to be more severe than at a megabank down the street, Krishna said.

"The risk to the credit union is much greater," he emphasized. "A big bank might be able to just ignore the loss. It is felt much more keenly at a credit union. Any time something like this happens, and it gets blasted across the front pages. It has a reputational impact. "It's probably felt more intensely where the sense of community is impacted. Many people have told us that following an [employee fraud] incident like this there is angst and flight."

One of the points the authors make in their book is that fraud is increasing. Is the current economic climate making people desperate?

"It is a factor," Krishna said. "There are other factors that are also very, very important. One is the fact that fraud is a white-collar crime. Prosecution of these crimes is not as quick. The threshold can be much greater, much higher. The losses have to be very, very significant. So we end up with a situation where people know they can get away with it."

"Organized crime is also playing a much more significant role. Crime rings are able to coerce an employee-for example, look up the identities of 100, 200, 300 members and hand it over to people outside the bank who are set up for account takeover or sell the information on the street."

So what's a credit union to do? For one thing, Krishna suggests, look for employees at risk, for example, those facing major medical bills or those coping with financial problems posed by a divorce. Is an employee gambling heavily?

While credit unions do a good job of screening employees at the time they're hired, it's important to remember circumstances change. Continue to monitor employees, and let them know you're alert.

Krishna stresses two things. Be vigilant-the problem is getting larger and more sophisticated. Be honest-could it happen? Will it happen? He and Inscoe believe the answer is "yes."

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