Dormant Account Control Weaknesses

This blog was authored by my colleague Folashade Abiola-Banjac, a principal within our financial institution forensic group.

How can Dormant accounts serve as a window into a credit union’s internal control deficiencies?

Forensic investigations of credit unions have granted me the opportunity to obtain some valuable information of how the treatment, or lack thereof, of dormant accounts can provide some important perspective on internal controls. Simply put, a dormant account “is an account with no activity or contact with the member for a specified period of time.” These accounts are particularly at a high risk for fraud if they are not routinely monitored. We have the following recommendations that we provide to clients in reference to dormant accounts:
1. Annually review written polices and procedures for dormant accounts.
2. Routinely monitor credit union employee access to dormant accounts. Specifically, employees granted temporary access to work on special projects that include dormant accounts.
3. Review information technology (IT) controls to determine parameters for red flags on dormant accounts.
4. Implement ongoing monitoring of accounts released from dormancy.

Far too often, credit unions lack some or all of the following:

• adequate internal controls
• monitoring over dormant accounts
• failing to review the reports produced

These deficiencies have resulted in many opportunities for fraud and misconduct related to dormant accounts. CLA notes that without appropriate file maintenance report reviews, IT access monitoring, and red flag parameters, credit unions leave their dormant accounts vulnerable and susceptible to misconduct.

The CLA forensic practice stands ready to assist our credit union clients with a range of services from proactive reviews of policies and procedures to actual forensic investigations.