The purpose of this policy is to set forth guidelines to be followed in the event fraud is suspected or discovered.

1. FRAUD BY NON-CREDIT UNION EMPLOYEES
1. Suspicious Activity.

Any suspicious activity shall be reported to Credit Union management or to the Audit Committee. Employees will take extra precautions to gather and preserve any evidence for investigative purposes. Any future transactions with the suspected party shall be conducted very cautiously.

2. Discovered Activity.

1. All evidence shall be forwarded to management or to the Audit Committee. The Audit Committee will determine when enough evidence has been obtained to confront the suspected party. Such evidence must be of the type that would allow law enforcement officials to prosecute the suspected party.

2. Future activity with the suspected party can be suspended if the Audit Committee or management believes the evidence can support the suspension. The suspected party must be contacted and told about the suspension.

3. If the fraudulent activity has or will cause a loss to the Credit Union or its members, proper law enforcement authorities shall be contacted.

2. FRAUD BY CREDIT UNION EMPLOYEES
1. Deterrence and Detection of Fraud.

1. >It is the intent of the policies of this Credit Union to discourage opportunities for fraud by its employees.

2. Management is responsible for implementing the necessary procedures and internal controls that provide obstacles for successful embezzlement.

3. The Audit Committee is responsible for examining the adequacy and effectiveness of those controls established by management. Such examinations can be augmented by written reports from CPA auditors, state and federal examiners.

4. It is the responsibility of all employees, committee members, and directors to report any suspected wrongdoing to management or the Audit Committee.

2. Investigation.

Immediately upon discovery, the Audit Committee will be notified. The Audit Committee will determine who will be assigned the responsibility for the investigation. Responsibility may be assigned to Credit Union personnel, the Audit Committee, sponsor security, or outside specialists such as the CPA firm, league auditing staff, state or federal regulatory agencies, or CUMIS Risk Management.

3. Conduct.

1. The Audit Committee should contact the Credit Union's legal counsel to avoid litigation relating to defamation, false imprisonment, malicious prosecution and assault.

2. Special consideration needs should be given to a suspect employee with a known physical impairment such as a heart condition, diabetes, other condition requiring medication, or pregnancy.

4. Suspension or Termination

1. The CUMIS Credit Union Discovery Bond suspends coverage on any employee or director once the Credit Union learns of any fraudulent or dishonest act. It is therefore very important that the investigation be conducted as quickly as possible to prevent further losses.

2. The Audit Committee, and the Board of Directors if necessary, shall consult legal counsel to determine guidelines for termination or suspension of a is honest employee depending on the nature of the offense, dollar amount involved, existing policies, effect on bond.

5. Notification of Interested Parties
1. The Audit Committee will ascertain that the proper persons are contacted.

2. If the evidence is not sufficient to clearly implicate the dishonest person, the Audit Committee, the Personnel Committee and management shall consider additional controls or job duty changes to discourage opportunities. Such changes may be made without the employee's knowledge.

3. If the evidence is sufficient to clearly implicate the dishonest person, the Audit Committee, the Personnel Committee and management will seek the dishonest employee's written resignation. If a resignation cannot be obtained, the Personnel Committee will seek legal counsel's advise on dismissing the employee. The Personnel Committee shall act based on legal counsel's advise. The Audit Committee will report the act and the resulting Credit Union actions to the Tennessee Department of Financial Institutions, Credit Union Division.

4. If the Credit Union has or will soon suffer a dollar loss, and if the evidence is sufficient to clearly implicate the dishonest person, the Personnel Committee will seek legal counsel's advice on dismissing the employee. The Audit Committee will seek legal counsel's advice on reporting the loss to proper authorities. The decision may be based on dollar amount and the evidence.

5. Based on legal counsel's advice, the Audit Committee will make a report to the proper law enforcement agency. Further, the Audit Committee will make a to the Tennessee Department of Financial Institutions, Credit Union Division. The Audit Committee will also make a report to CUMIS Risk Management.

Approved June 15, 1995
Reviewed May 23, 1996
Reviewed August 20, 1998
Reviewed August 26, 1999
Reviewed May 23, 2002
Reviewed July 24, 2003
Reviewed March 16, 2005
Revised June 15, 2005

NOTE: Attached to this policy is an acknowledgment form and an annual disclosure statement:

The EPB Employees Credit Union considers any form of fraud or dishonesty on the part of its employees as totally unacceptable conduct. Acts which are considered to be either fraudulent or dishonest include, but are not limited to:

1. Manipulation of loan accounts, documents, computer records, shares or share draft accounts.
2. Theft of any kind, including stealing from members' accounts, overpayment of dividends and creating fictitious loans.
3. Check/share draft kiting.
4. Forgeries.
5. Unauthorized or unapproved salary advances or overtime reimbursement.
6. Intentional violation of credit union rules, internal controls, regulations or procedures.
7. Intentionally failing to secure collateral, to properly record a security interest in collateral or pledging a member's shares as collateral without that member's permission.
8. Granting or requesting preferential treatment for ANYONE.

I have read the above Fraud Policy. I understand that the Board of Directors and management will not tolerate fraudulent or dishonest activities of any kind and that I am not to engage in acts of fraud or dishonesty while employed at the EPB Employees Credit Union.

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Employee                             Witness