Material Loss Review of Vensure FCU

NCUA's Office of the Inspector General (IG) recently released its Material Loss Review of the failure of Vensure Federal Credit Union. The estimated loss from the failure of Vensure to the National Credit Union Share Insurance Fund is $39 thousand; but it could go higher if the Department of Justice seeks to recover Vensure’s earnings related to processing illegal internet gambling ACH transactions.

The IG report found that NCUA's decision to seize Vensure arose from a Department of Justice action against several on-line poker companies. As a result, the Department of Justice seized all funds of one of Vensure’s members - Trinity Global Commerce Corp. (Trinity), a processor of on-line gambling transactions. Trinity was Vensure’s largest depositor at the time and nearly all of Vensure's earnings (nearly 90 percent during 2010) came from transaction fees processing Trinity’s internet gambling transactions.

After Trinity’s funds were seized, Vensure had an Automated Clearing House (ACH) receivable of approximately $877,000 as a result of subsequent return items. When Vensure recognized the loss from the uncollectible ACH receivable, the credit union became insolvent.

In addition, the IG report concluded that Vensure’s management and Board did not operate the credit union in a manner consistent with typical natural person credit unions. Vensure had minimal loans in 2009 and no loans during 2010 and 2011.

The report states that "the significant and rapid increase in Vensure’s fee related income, as well as the size of the individual and cumulative ACH wire transactions given the small size of the credit union, the significant change in the make-up of its management and Board, and its few traditional sources of income, should have triggered ... examiners to expand the scope of their on-site examinations and supervision contacts to thoroughly evaluate the credit union’s income to determine the nature of its source and why it increased so rapidly." But there is no evidence that examiners did a detail review regarding the nature and scope of the business fee income nor questioned the Board and management over the change in Vensure's business model.

Read the report.