CU Times asked Colletts if CUNA Mutual requires credit unions to implement a fraud policy.

“It’s not a requirement but I haven’t had a credit union that chose not to implement it,” she said. “Usually, once you bring it to their attention, if it’s not implemented, they really welcome the recommendation and understand the importance of it.”

Colletts said if a credit union chose not to put an employee dishonesty policy in place, that information is forwarded to the underwriter.

“The underwriter would generally take it up with the credit union as part of their coverage. I’m not really involved in that process,” she noted.

Under questioning from NCUA Board Member Mark McWatters Oct. 23 at the NCUA Board meeting, outgoing NCUA CFO Mary Ann Woodson said almost all of the NCUSIF losses from 2014's credit union failures were due to internal fraud.

She told the NCUA Board that $28.6 million or 94%)of the $30.4 million in losses to the NCUSIF from the 12 credit union failures this year were related to fraud.

“A lesson learned for this agency: spend more time thinking about things like fraud as opposed to regulation,” McWatters said.

“I take exception to that comment,” NCUA Board Chairman Debbie Matz responded at last week’s board meeting.

Matz said that regulations are the best way to minimize the failure of credit unions.

“Safety and soundness and sound regulation go hand in hand and I want to make sure that’s on the record,” she said.

NCUA Public Affairs Specialist John Fairbanks later told CU Times the estimated fraud losses for 2014 in credit unions that were liquidated totaled $26.9 million.

He said the earlier estimate of $28.6 million for 2014 was based on the estimated losses in cases where fraud was present, which can include losses in credit unions that were not liquidated.

“Fraud loss estimates can change as the liquidation process proceeds, and there may be offsetting recoveries from asset sales. But the current estimated loss is that $26.9 million figure,” Fairbanks said.

NCUA Board Member Rick Metsger said there is a great deal of variation in internal fraud losses each year since a single credit union failure or lack thereof can cause annual figures to spike up or down.

Metsger told CU Times internal fraud is not a risk to the NCUSIF overall.

“This isn’t a risk to the fund collapsing but there’s a reputation risk for credit unions when members see this stuff is happening and that’s important and as an insurer and credit unions pay for this insurance and so our fiduciary responsibility is to do everything we can to mitigate losses to that fund,” he said.

Metsger added, “There is no loss too small that shouldn’t get our attention, but it’s not a risk to the solvency of the fund.”