Revelations that more than half a million euro has been stolen from accounts in two Cork credit unions should lead to an external review of the governance of both institutions.
That’s according to financial adviser and consumer champion Eddie Hobbs who said the revelations relating to Gurranabraher Credit Union and Synergy Credit Union in Fermoy showed a “clear failure” of internal auditing.
Earlier this week, it emerged a credit union staff member was dismissed after the discovery of alleged financial irregularities of up to €200,000 at Gurranabraher Credit Union.
It came less than a week after it emerged that €400,000 was stolen from members’ accounts at Synergy Credit Union in Fermoy in a series of “unauthorised transactions”.
Both credit unions have referred investigations to both the gardaí and the Central Bank.
Responding to the revelations, Mr Hobbs said an external review of governance was needed in order to get to the bottom of the matters.
“There was clearly a failure of internal auditing here and some people within the credit union have to take responsibility for that fact. The fact that these issues came up raises questions about the standard of internal auditing.”
“What needs to happen now is an external review of the governance of the credit union. Whatever reports are produced needs to be circulated to the members and the members should decide on what actions need to be taken going forward. Only then will people be in a position to move on,” he said.
However, Mr Hobbs praised the credit union movement as a whole and said the lack of incidents involving fraud were a clear sign of how well it operates.
“We’re very lucky in Ireland that there haven’t been more incidents like these. We are very, very lucky to have the quality of credit unions that we do here. The relative damage done in terms of fraud and bad lending by credit unions is infinitesimally smaller than what was done by the banks.
"Infinitesimally smaller. The credit union sector in terms of how it dealt with non-performing loans and bad debts has performed very well and it has to be seen in that context,” he said.
However, both institutions have also declined to answer a series of questions relating to the irregularities.
In the case of Gurranabraher Credit Union, it is understood that the investigation is focussing on a staff member who was allegedly engaged in misappropriation of members’ funds for a number of years before being exposed.
However, it has declined to elaborate on the nature of the investigation, the amount involved, or the number of accounts that may have been affected. It did confirm that none of the 15,000-plus members had been exposed to a loss as a result of the matter.
Synergy Credit Union confirmed that the €400,000 was stolen from some 29 member accounts. However, it declined to specify the period of time over which this occurred. It also declined to say whether the insurance policy of the credit union was used to replenish the 29 affected accounts or if the original monies recovered.
“As there are still various third-party processes underway, we cannot comment in any greater detail on this matter, except to say that an individual has accepted responsibility, co-operated with the investigation in full,” said a statement.
It also remains unclear if there are other similar investigations ongoing in any other credit unions around the country.
A spokesperson for the Irish League of Credit Unions said that “in relation to other investigations, each credit union is autonomous and deals directly with any such matters”.
Members’ money safe, says credit union body
Members’ savings continue to be safe and secure in Irish credit unions. The movement is extremely well capitalised and holds over €2.3bn in capital reserves, with €914m in excess capital above the 10% requirement.
Assets currently stand at over €14.5bn. Furthermore, credit union members’ savings continue to be guaranteed by the Government Deposit Guarantee Scheme; up to €100,000 per member.
With the increasing threat of financial crime in all organisations, credit unions continue to evolve and strengthen their fraud-prevention control frameworks. As well as the pre-existing controls in place in credit unions, since 2013 each credit union must now have a compulsory risk function, Compliance function and an internal auditor to enhance the existing structures.
Most recently, credit unions have also moved to fund the widespread roll-out of an enhanced risk and compliance support service, under the Credit Union Compliance Centre (CUCC).
The CUCC will work with credit union compliance and risk functions to implement a more consistent framework in compliance and risk management. Credit unions will continue on this process to ensure risk and compliance systems and processes are as effective as possible.
All credit unions carry insurance to deal with matters such as fraud or theft.
While instances such as these are extremely regrettable, they remain isolated. As credit unions are democratic and fully accountable to their members, where such incidents occur it often comes to public attention.
This is distinctly different to other financial institutions where such incidents may be dealt with via a closed internal process. In relation to other investigations, each credit union is autonomous and deals directly with any such matters.
Long record of service but not without controversies
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