Insider Accounts

The FCUA § 1761a, Officers of the board, requires officials to be members of the FCU. Article II, Section 3 of the FCU Bylaws requires members to maintain accounts at the credit union. In addition, employees and their family members (even if not in the same household) may hold accounts.

Insider accounts pose a risk of abuse. If proper controls are not in place, employees can manipulate their own or a family member’s account. Though officials generally do not have access to the computer system, they may coerce employees to give them, or related parties, preferential treatment. Good internal controls include enhanced monitoring of insider accounts.

Examiners can review insider account operations to determine if controls are in place to prevent employees from manipulating their own or a family member’s account. To review insider account controls, examiners:

  • Review written policies or procedures regarding employee and official accounts and related parties/related party transactions

  • Assess whether policies and procedures prohibit preferential treatment for employees and officials

  • Verify that employees do not have transaction authority over their own or a family member’s account by:

    • Reviewing system report showing user ID and corresponding blocked accounts

    • Requesting an employee test the control by attempting to perform a transaction on their account or corresponding blocked accounts

    • Selecting a sample of insider and family member accounts to review recent activity

      Statements alone will not show deleted transactions, reversals, or the employee who posted the transaction. Examiners may need to sit with an employee to view transaction histories on a terminal.

    • For the sample selected, review for unusual activity, including, but not limited to:

      • Loan payments applied directly to principal

      • Terms in the computer system do not agree with terms on the note

      • Skipped loan payments

      • Advanced due dates

      • High-dollar volume of transactions in relation to salary

      • Frequent overdrafts

      • Reversed interest payments, late fees, or NSF fees

      • Preferential treatment—for example, favorable rates or terms, reversal of fees, etc.

      • From the sample of insider and family member accounts:

  • Trace account transfers to and from unrelated accounts to determine if the insider is joint on the unrelated accounts, or has appropriate authorization to perform these transactions—for example, power of attorney for related elderly member

  • Trace a sample of loan payments to the source documents—for example, deposit slips, checks, transfers, payroll, etc.

  • Trace a sample of deposits to source documents

  • Determine if the supervisory committee, internal auditor, or other designated third party performs a documented review of insider accounts

  • Identify and pursue red flags

Last Updated on October 14, 2021