€700k missing from Rush Credit Union

Brendan Burgess

Brendan Burgess

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According to Charlie Weston, they gave out loans in members' names, but the members knew nothing about them. It was probably just one rogue employee on the fiddle.


"It is understood that forensic accountants from Grant Thornton, appointed by the board of Rush Credit Union, have uncovered evidence that fake loans were created on the accounts of members.

And it is understood there are no records of some deposits taken from members."


With over 300 credit unions, it's probably a surprise that there are not more examples like this.
 
In fairness, it happens in most financial institutions at some time or other. I've investigated a few of these in a past working life in a bank and worked in areas where it happened and not a pleasant experience.
 
That is the point I was making about 300 separate credit unions. If there were a fraud in one of the 300 branches of AIB, it probably wouldn't hit the headlines. Mind you, if €700k was unaccounted for, it probably would.

Brendan
 
Brendan Burgess said:
That is the point I was making about 300 separate credit unions. If there were a fraud in one of the 300 branches of AIB, it probably wouldn't hit the headlines. Mind you, if €700k was unaccounted for, it probably would.

Brendan
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it usually does get public if there is a prosecution and the banks I've worked for had a zero tolerance when it came to trying to convict as it was a warning to other staff.
 
Internal fraud is always a systemic risk factor in all financial institutions. The main preventions are a strict procedural system on loan drawdowns with no 1 individual being in a position to sign off on each stage of the process. In any modern bank I have worked in it would take the combined collusion of 3 or 4 employees to drawn down a loan fraudulently. Alternative poor implementations of procedures could leave gaps in the system. It would be interesting to see whether correct procedures were in place in this CU and if so how they were circumvented!
 
According to the Indo's update on the story:
One source familiar with the situation said: "There seems to have been two books recording the deposits, one official, and one under the counter. The level of deposits are not reconciled.
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I'm not sure if they literally mean deposits were written into a book, but it wouldn't surprise me if there was no computerised system to record deposits and loans.
 
44brendan said:
Internal fraud is always a systemic risk factor in all financial institutions. The main preventions are a strict procedural system on loan drawdowns with no 1 individual being in a position to sign off on each stage of the process. In any modern bank I have worked in it would take the combined collusion of 3 or 4 employees to drawn down a loan fraudulently. Alternative poor implementations of procedures could leave gaps in the system. It would be interesting to see whether correct procedures were in place in this CU and if so how they were circumvented!
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Division of duties was always a key control but you wonder in a small CU if they had sufficient staff numbers in place to allow it to happen properly. Payments processing is always a bigger risk as low value transactions are probably not monitored but over a period of time, they all add up
 
SBarrett said:
Rush CU had been resisting merging with another CU. Not difficult to see why...
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I seriously doubt the two matters are related, if they were then it would imply that an influential number of the Board of Directors were involved, or at the very least were aware, of the fraud.

The size of a credit union, or the number of credit unions in existence, does not determine whether there is a risk of fraud or not. This incident is being used by some to push an agenda, to see the CUs compelled to merge regardless of whats best for them, or what the owners of each CU want done with the CU that they own.

It doesn't matter how big or small an institution is - if you think it does, then how do you explain what happened at such large institutions as Enron, Barings, AIB etc ?

The questions that should be asked in this instance are questions such as:
  • Why did the internal auditor not discover this fraud at an earlier stage, if it has been going on for quite a while (as it would appear) ?
  • Why did the external auditors not pick up on it, while inspecting sample entries across the share lodgements and loan transactions ?
  • Has the Regulator (Central Bank) been found wanting ... again ?

Regretfully, when all is said and done, if someone wants to defraud you then they will find a way. The best that can be done is to severly restrict the potential for fraud and thereafter, ensure there is damage limitation (by way of suitable controls, insurances where available etc.).
 
MrEarl said:
Regretfully, when all is said and done, if someone wants to defraud you then they will find a way. The best that can be done is to severly restrict the potential for fraud and thereafter, ensure there is damage limitation (by way of suitable controls, insurances where available etc.).
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Yes I fully agree with this! Unfortunately, despite significant evidence to the contrary there does appear to be an absence of regularized standardized control checks in many financial institutions (both large and small) that should spot these fraudulent transactions at an early stage. From experience I have learned that unless there are good checking and control systems in place people who would normally never consider stealing are tempted and quite frequently test the system. If they don't get caught at an early stage they tend to up the ante and eventually the amounts taken are too significant not to be missed!
 
44brendan said:
Yes I fully agree with this! Unfortunately, despite significant evidence to the contrary there does appear to be an absence of regularized standardized control checks in many financial institutions (both large and small) that should spot these fraudulent transactions at an early stage. From experience I have learned that unless there are good checking and control systems in place people who would normally never consider stealing are tempted and quite frequently test the system. If they don't get caught at an early stage they tend to up the ante and eventually the amounts taken are too significant not to be missed!
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more today from Charlie Weston
http://www.independent.ie/opinion/c...fle-scam-but-no-one-is-laughing-35177750.html
 
The debt will be bought out probably by another Credit Union,, the loan repayments will be transferred over.. all loans will still have to be repaid.

I would really like to see the criminal activity at this Credit Union dealt with severely.. it is a terrible betrayal of trust and fraud at its worst..

Audit practices are largely a box ticking exercise and if you had two sets of accounts,, it would be fairly easy to cover your tracks... However, the board have a lot to answer for..
 
willyfones said:
The debt will be bought out probably by another Credit Union,, the loan repayments will be transferred over.. all loans will still have to be repaid.
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Most likely,

But if I were a member with borrowings and had funds available, I would try putting an offer in writting to the lads in Grant Thornton. Prior to cutting a deal with another credit union to sell the loan book, they might just take a reasonable offer to settle a loan (particularly as they are likely to have to sell the loan book at a significant discount when they do try and move it on).


willyfones said:
I would really like to see the criminal activity at this Credit Union dealt with severely.. it is a terrible betrayal of trust and fraud at its worst..

Audit practices are largely a box ticking exercise and if you had two sets of accounts,, it would be fairly easy to cover your tracks... However, the board have a lot to answer for..
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Agree entirely,

There is absolutely no way in the world that the people responsible cannot be held to account in the courts for what has happened here.

Also, I expect to see firm action taken against those proven to have been hiding cash and title to properties from the Revenue.

One of the things that baffles me is why the members were not crying foul play when one of the staff members won the car draw. I don't think I can ever remember a situation where a competiton was held without the organisers and staff being excluded from winning etc.
 
The manager is at least being sanctioned by the central bank. Now we wait to see whether criminal charges will be made against anyone.

From the Irish Times
It’s manager, Anne Butterly, was suspended by the board in March and the Central Bank subsequently went to court to have her suspended from a management position in any financial services firm for a period. This suspension was extended for a further three months in September.
 
Seagull said:
The manager is at least being sanctioned by the central bank. Now we wait to see whether criminal charges will be made against anyone.

From the Irish Times
It’s manager, Anne Butterly, was suspended by the board in March and the Central Bank subsequently went to court to have her suspended from a management position in any financial services firm for a period. This suspension was extended for a further three months in September.
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My wife and I had an account there up until 2008 when a number of our lodgements went 'missing'. Luckily, I spotted it and was reimbursed the next day after meeting them & threatening them with the Financial Regulator. On reflection, I should have known something more was amiss when only one member of the CU attended the meeting with us...

Hopefully, there will be criminal prosecutions to serve as a deterrent.
 
The Deposit Guarantee Scheme has paid out on 98% of the 9,700 members deposits.

The Deposit Guarantee Scheme covers sums under 100,000 euro. Also, deposits and loans can be netted when the Deposit Guarantee Scheme is called on.

The 2% of deposits where compensation was not paid were probably those with more than 100,000 euro or had loans as well as deposits.

I think this is the first time that the Deposit Guarantee Scheme has paid out since the IBRC liquidation. With the IBRC liquidation, both the Deposit Guarantee Scheme and the Eligible Liabilities Guarantee (ELG) Scheme paid out. These schemes covered the vast majority, but not all, of IBRC depositors.
 
My housemate has received a cheque for his shares in the post. He had a question I couldnt answer. He had a car loan with the CU, he is foreign and was unaware of the situation and was very surprised to get a check for his shares, he has had no communication in relation to his loan, what happens to it? I see from the site the CU is open for loan repayments only, but a third party says he would be mad to pay it back. Moral issue and bar stool economics aside what happens to the outstanding loans? Should he wait to receive communication on this, wait for someone to buy the loans? The shares would have cancelled out the loan with only a nominal amount remaining. I have read the above post about the probable actions that will be taken but what should happen in the short term?
 
CiaranT said:
The Deposit Guarantee Scheme has paid out on 98% of the 9,700 members deposits.

The Deposit Guarantee Scheme covers sums under 100,000 euro. Also, deposits and loans can be netted when the Deposit Guarantee Scheme is called on.

The 2% of deposits where compensation was not paid were probably those with more than 100,000 euro or had loans as well as deposits.

I think this is the first time that the Deposit Guarantee Scheme has paid out since the IBRC liquidation. With the IBRC liquidation, both the Deposit Guarantee Scheme and the Eligible Liabilities Guarantee (ELG) Scheme paid out. These schemes covered the vast majority, but not all, of IBRC depositors.
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It paid out for Berehaven Credit Union too. Also, it says that only the arrears of loans can be netted against the payments.

Other info here including what happens to the loans...:

[broken link removed]
 
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