House passed a bill backed by bank and credit union trade groups and a bipartisan group of House members called on the Office of Financial Research (OFR) study the potential impact of the current expected credit loss (CECL) accounting model.
The House on October 22 voted 249-173 to pass the Corporate Transparency Act (H.R. 2513). The bill is supported by both bank and credit union trade groups. The legislation, sponsored by Rep. Carolyn Maloney (D-N.Y.), would direct the Financial Crimes Enforcement Network to create a national database that banks could use to verify a business’s beneficial ownership information. The bill was amended before passage to include legislation championed by Rep. Emanuel Cleaver (D-Mo.) that would modernize the existing anti-money laundering/Bank Secrecy Act framework by, among other things, enhancing bank-law enforcement communications.
Also, a bipartisan group of 28 House members last week called on the Financial Stability Oversight Council to require that the OFR study potential financial stability effects of the CECL model for loan loss accounting, which goes into effect for large reporting companies in January.
Specifically, the lawmakers called on OFR to study CECL’s procyclical characteristics and their effects on access to credit and market volatility; the effects of CECL on the solvency and leverage of financial institutions; and the effects of procyclicality on institutions complying with CECL, including contagion risk during times of economic stress. Read the letter.
Showing posts with label Bank Secrecy Act. Show all posts
Showing posts with label Bank Secrecy Act. Show all posts
Wednesday, October 23, 2019
Wednesday, October 2, 2019
GAO Reports on Information Sharing Between Regulators and FinCEN
The Government Accountability Office (GAO) recently released a report on the Bank Secrecy Act (BSA).
The report examined, among other objectives, how the Financial Crimes Enforcement Network (FinCEN) and supervisory and law enforcement agencies (1) collaborate and (2) provide metrics and feedback on the usefulness of BSA reporting.
However, GAO found that FinCEN did not consistently communicate available metrics and when FinCEN did so, it did it on an ad-hoc basis.
Below is information specific to credit unions from the report.
According to the report, each federal credit union must receive a BSA examination each examination cycle — although the frequency and scope of these examinations may vary based on the credit union’s size and other risk factors. National Credit Union Administration (NCUA) officials noted that certain small credit unions with limited separation of duties may be examined more frequently.
According to the report, NCUA made 50 referrals for potential BSA violations to FinCEN between fiscal year 2015 and 2018 (see Table 3).
Appendix II has statistics on the number of BSA examinations and violations.
The most common BSA violations cited by the federal banking regulators were violations of requirements to report suspicious activities, 314(a) information-sharing requirements, rules for filing of reports, BSA training, and a system of internal controls.
NCUA accounted for the majority of 314(a) information-sharing violations, which include a financial institution failing to expeditiously search its records after receiving an information request from FinCEN based on credible evidence concerning money laundering.
Between fiscal year 2015 and the first half of fiscal year 2018, NCUA did 14,575 BSA examinations. During that time period, NCUA found 8,477 BSA violations, which resulted in 4,588 informal enforcement actions. NCUA counts each BSA violation in a Document of Resolution as an informal action.
However, NCUA did not issue any formal enforcement action against a credit union during that time period.
The report examined, among other objectives, how the Financial Crimes Enforcement Network (FinCEN) and supervisory and law enforcement agencies (1) collaborate and (2) provide metrics and feedback on the usefulness of BSA reporting.
However, GAO found that FinCEN did not consistently communicate available metrics and when FinCEN did so, it did it on an ad-hoc basis.
Below is information specific to credit unions from the report.
According to the report, each federal credit union must receive a BSA examination each examination cycle — although the frequency and scope of these examinations may vary based on the credit union’s size and other risk factors. National Credit Union Administration (NCUA) officials noted that certain small credit unions with limited separation of duties may be examined more frequently.
According to the report, NCUA made 50 referrals for potential BSA violations to FinCEN between fiscal year 2015 and 2018 (see Table 3).
Appendix II has statistics on the number of BSA examinations and violations.
The most common BSA violations cited by the federal banking regulators were violations of requirements to report suspicious activities, 314(a) information-sharing requirements, rules for filing of reports, BSA training, and a system of internal controls.
NCUA accounted for the majority of 314(a) information-sharing violations, which include a financial institution failing to expeditiously search its records after receiving an information request from FinCEN based on credible evidence concerning money laundering.
Between fiscal year 2015 and the first half of fiscal year 2018, NCUA did 14,575 BSA examinations. During that time period, NCUA found 8,477 BSA violations, which resulted in 4,588 informal enforcement actions. NCUA counts each BSA violation in a Document of Resolution as an informal action.
However, NCUA did not issue any formal enforcement action against a credit union during that time period.
Tuesday, February 12, 2019
Phishing Attack Targets CU AML Officers
Krebs on Security is reporting that on January 30 a highly targeted, malware-laced phishing campaign landed in the inboxes of anti-money laundering (AML) officers at multiple credit unions.
The USA Patriot Act requires all financial institutions to appoint at least two Bank Secrecy Act (BSA) contacts responsible for reporting suspicious financial transactions that may be associated with money laundering.
These BSA contacts at credit unions are registered with the National Credit Union Administration (NCUA). This information is not publicly available.
Given the targeted nature of the spear phishing attack, some within the credit union industry speculated that NCUA may have been compromised.
However, NCUA denied the allegation. NCUA in a February 8 press release stated:
This does raise the question of how did these phishers obtain this non-public information about BSA officers?
The USA Patriot Act requires all financial institutions to appoint at least two Bank Secrecy Act (BSA) contacts responsible for reporting suspicious financial transactions that may be associated with money laundering.
These BSA contacts at credit unions are registered with the National Credit Union Administration (NCUA). This information is not publicly available.
Given the targeted nature of the spear phishing attack, some within the credit union industry speculated that NCUA may have been compromised.
However, NCUA denied the allegation. NCUA in a February 8 press release stated:
Upon learning of the recent spear phishing campaign targeting Bank Secrecy Act officers at credit unions, the NCUA conducted a comprehensive review of its security logs and alerts. This review is completed, and it did not find any indication that information was compromised.It appears that the spear phishing campaign has spread beyond credit unions to other financial institutions.
This does raise the question of how did these phishers obtain this non-public information about BSA officers?
Thursday, October 4, 2018
Federal Regulators Issue Statement on Sharing Resources for BSA/AML Compliance
The financial regulatory agencies and the Financial Crimes Enforcement Network on October 3 issued a joint statement outlining how banks and credit unions may enter into collaborative arrangements to share resources in order to more effectively manage their Bank Secrecy Act and anti-money laundering obligations.
Collaborative arrangements described in this statement are most suitable to financial institutions with a community focus, less complex operations, and lower-risk profiles for money laundering or terrorist financing.
The agencies described several situations in which collaboration might be beneficial for financial institutions, such as conducting internal control functions, independent testing and BSA/AML training.
When entering into collaborative arrangements, banks and credit unions should carefully consider the arrangement in relation to their risk profile, ensure adequate documentation, consider legal restrictions, establish appropriate oversight mechanisms, and ensure that the arrangement is consistent with sound principles of corporate governance, the statement said.
The agencies added that “ultimately, each bank is responsible for ensuring compliance with BSA requirements” and that “sharing resources in no way relieves a bank of this responsibility.”
The National Credit Union Administration noted "[t]his may benefit some credit unions, especially smaller institutions which may find hiring or retaining staff with the necessary knowledge a challenge."
Read the statement.
Collaborative arrangements described in this statement are most suitable to financial institutions with a community focus, less complex operations, and lower-risk profiles for money laundering or terrorist financing.
The agencies described several situations in which collaboration might be beneficial for financial institutions, such as conducting internal control functions, independent testing and BSA/AML training.
When entering into collaborative arrangements, banks and credit unions should carefully consider the arrangement in relation to their risk profile, ensure adequate documentation, consider legal restrictions, establish appropriate oversight mechanisms, and ensure that the arrangement is consistent with sound principles of corporate governance, the statement said.
The agencies added that “ultimately, each bank is responsible for ensuring compliance with BSA requirements” and that “sharing resources in no way relieves a bank of this responsibility.”
The National Credit Union Administration noted "[t]his may benefit some credit unions, especially smaller institutions which may find hiring or retaining staff with the necessary knowledge a challenge."
Read the statement.
Thursday, December 15, 2016
Defunct Bronx CU Fined $500K by FinCEN
The Financial Crimes Enforcement Network (FinCEN) today assessed a $500,000 civil money penalty against Bethex Federal Credit Union, Bronx, New York for significant violations of the Bank Secrecy Act's anti-money laundering (AML) regulations.
In December 2015, the National Credit Union Administration liquidated Bethex, determining the credit union was insolvent with no prospects of returning to viability. At the time of its liquidation, the credit union had $12.2 million in assets.
FinCEN’s penalty is a claim against any assets that remain after the completion of Bethex’s liquidation. The penalty will not affect the National Credit Union Share Insurance Fund or any other credit union.
Since 2002, Bethex’s AML program maintained internal controls specific for low to moderate-income clientele within its designated field of membership in New York City.
But in 2011, Bethex began providing services to wholesale money-services businesses (MSBs) that were located outside New York and engaged in high-risk activity. It processed transactions for MSBs in more than 30 countries, including Mexico, Ghana, Bangladesh, China and Pakistan, all of which carried high risks for money laundering.
However, Bethex did not update its anti-money laundering programs. As a result, Bethex was unable to adequately monitor, detect, and report suspicious activity or mitigate the associated risks, leaving the credit union particularly vulnerable to money laundering.
The enforcement order found that Bethex was not adequately staffed to handle the volume of MSB transactions.
Bethex failed to timely detect and report suspicious activity to FinCEN and did not file any Suspicious Activity Reports (SARs) from 2008 through 2011. In 2013, as a result of a mandated review of previous transactions, the credit union late-filed 28 SARs. The majority of the suspicious activity involved high-volume, large amount transfers outside of Bethex’s expected customer base by MSBs capable of exploiting Bethex’s AML weaknesses.
Unfortunately, most of those SARs were inadequate and contained short, vague narratives encompassing a broad summary of multiple and unrelated instances of suspicious activity. FinCEN found that these SARs provided little benefit to law enforcement.
Read the FinCEN press release.
Read the enforcement order.
In December 2015, the National Credit Union Administration liquidated Bethex, determining the credit union was insolvent with no prospects of returning to viability. At the time of its liquidation, the credit union had $12.2 million in assets.
FinCEN’s penalty is a claim against any assets that remain after the completion of Bethex’s liquidation. The penalty will not affect the National Credit Union Share Insurance Fund or any other credit union.
Since 2002, Bethex’s AML program maintained internal controls specific for low to moderate-income clientele within its designated field of membership in New York City.
But in 2011, Bethex began providing services to wholesale money-services businesses (MSBs) that were located outside New York and engaged in high-risk activity. It processed transactions for MSBs in more than 30 countries, including Mexico, Ghana, Bangladesh, China and Pakistan, all of which carried high risks for money laundering.
However, Bethex did not update its anti-money laundering programs. As a result, Bethex was unable to adequately monitor, detect, and report suspicious activity or mitigate the associated risks, leaving the credit union particularly vulnerable to money laundering.
The enforcement order found that Bethex was not adequately staffed to handle the volume of MSB transactions.
Bethex failed to timely detect and report suspicious activity to FinCEN and did not file any Suspicious Activity Reports (SARs) from 2008 through 2011. In 2013, as a result of a mandated review of previous transactions, the credit union late-filed 28 SARs. The majority of the suspicious activity involved high-volume, large amount transfers outside of Bethex’s expected customer base by MSBs capable of exploiting Bethex’s AML weaknesses.
Unfortunately, most of those SARs were inadequate and contained short, vague narratives encompassing a broad summary of multiple and unrelated instances of suspicious activity. FinCEN found that these SARs provided little benefit to law enforcement.
Read the FinCEN press release.
Read the enforcement order.
Monday, March 14, 2016
NCUA Is A "Kid Glove" Regulator
Banks and credit unions are subject to many of the same laws and regulations. But the difference is in how the bank and credit union regulators implement these laws and regulations.
The latest example of these differences was highlighted by Credit Union Times. The article looked at the Office of the Comptroller of the Currency (OCC) recently issued new civil money penalty guidance and Bank Secrecy Act/Anti-Money Laundering (BSA/AML) supervision procedures and then looked at what NCUA is doing.
With regard to civil money penalties, National Credit Union Administration (NCUA) Public Affairs Specialist John Fairbanks stated that the agency has not assessed civil money penalties for regulatory violations since Debbie Matz was named chairman of the NCUA. The only exception is for credit unions that are late in filing their call reports. Debbie Matz was named chairman of NCUA in 2009. Over that same time period, banks have been subject to numerous civil money penalties for various regulatory violations.
The article also noted that NCUA has no plan to follow OCC's lead with regard to BSA/AML enforcement actions outlined in a February 29 bulletin. The bulletin states that OCC is required by statute to issue a cease-and-desist order when citing BSA compliance program violations or violations of 12 USC 1818(s) for repeat or uncorrected BSA compliance problems.
This further illustrates that NCUA is a lax regulator, which treats credit unions with kid gloves.
The latest example of these differences was highlighted by Credit Union Times. The article looked at the Office of the Comptroller of the Currency (OCC) recently issued new civil money penalty guidance and Bank Secrecy Act/Anti-Money Laundering (BSA/AML) supervision procedures and then looked at what NCUA is doing.
With regard to civil money penalties, National Credit Union Administration (NCUA) Public Affairs Specialist John Fairbanks stated that the agency has not assessed civil money penalties for regulatory violations since Debbie Matz was named chairman of the NCUA. The only exception is for credit unions that are late in filing their call reports. Debbie Matz was named chairman of NCUA in 2009. Over that same time period, banks have been subject to numerous civil money penalties for various regulatory violations.
The article also noted that NCUA has no plan to follow OCC's lead with regard to BSA/AML enforcement actions outlined in a February 29 bulletin. The bulletin states that OCC is required by statute to issue a cease-and-desist order when citing BSA compliance program violations or violations of 12 USC 1818(s) for repeat or uncorrected BSA compliance problems.
This further illustrates that NCUA is a lax regulator, which treats credit unions with kid gloves.
Friday, March 4, 2016
Chairman of Failed CU Accepted Bribes from Unlawful Bitcoin Exchange
The former Chairman of the Board of failed HOPE Federal Credit Union (NJ), Trevon Gross, was indicted for accepting over $150,000 in bribes from the operators of Coin.mx, an unlawful Bitcoin exchange.
According to the indictment, Gross allowed Anthony Murgio, Yuri Lebedev, and their co-conspirators to acquire control of HOPE FCU and assisted their efforts in exchange for bribes, which Gross directed Murgio to pay to bank accounts under Gross’s control. In total, Murgio and his co-conspirators paid over $150,000 to accounts under Gross’s control. With Gross’s assistance, Murgio installed his co-conspirators, including Lebedev, on HOPE FCU’s Board of Directors and transferred Coin.mx’s banking operations to HOPE FCU.
The indictment stated that Murgio, Lebedev, and their co-conspirators operated HOPE FCU as a captive bank for their unlawful Bitcoin exchange until at least early 2015. At that time, after discovering that substantial payment processing activity was being conducted through HOPE FCU, the National Credit Union Administration (NCUA) forced HOPE FCU to cease engaging in such activity, and Murgio thereafter found new, overseas payment processing channels for his unlawful business. In October 2015, in connection with the charged conduct, the NCUA placed HOPE FCU into conservatorship, and thereafter liquidated it.
Gross is charged with one count of corruptly accepting payments as an officer of a financial institution, which carries a maximum sentence of 30 years in prison.
Read the press release.
According to the indictment, Gross allowed Anthony Murgio, Yuri Lebedev, and their co-conspirators to acquire control of HOPE FCU and assisted their efforts in exchange for bribes, which Gross directed Murgio to pay to bank accounts under Gross’s control. In total, Murgio and his co-conspirators paid over $150,000 to accounts under Gross’s control. With Gross’s assistance, Murgio installed his co-conspirators, including Lebedev, on HOPE FCU’s Board of Directors and transferred Coin.mx’s banking operations to HOPE FCU.
The indictment stated that Murgio, Lebedev, and their co-conspirators operated HOPE FCU as a captive bank for their unlawful Bitcoin exchange until at least early 2015. At that time, after discovering that substantial payment processing activity was being conducted through HOPE FCU, the National Credit Union Administration (NCUA) forced HOPE FCU to cease engaging in such activity, and Murgio thereafter found new, overseas payment processing channels for his unlawful business. In October 2015, in connection with the charged conduct, the NCUA placed HOPE FCU into conservatorship, and thereafter liquidated it.
Gross is charged with one count of corruptly accepting payments as an officer of a financial institution, which carries a maximum sentence of 30 years in prison.
Read the press release.
Tuesday, January 12, 2016
NCUA's Supervisory Priorities for 2016
The National Credit Union Administration (NCUA) issued a letter to federally insured credit unions regarding its supervisory priorities for 2016.
The letter is intended to assist credit unions in preparing for their next NCUA examination.
NCUA noted that field staff will focus on the following issues this year: cyber-security, Bank Secrecy Act compliance, interest rate risk, TILA-RESPA integrated disclosure rule, credit union service organization reporting, and incident response procedures regarding unauthorized access to members information.
Read the letter.
The letter is intended to assist credit unions in preparing for their next NCUA examination.
NCUA noted that field staff will focus on the following issues this year: cyber-security, Bank Secrecy Act compliance, interest rate risk, TILA-RESPA integrated disclosure rule, credit union service organization reporting, and incident response procedures regarding unauthorized access to members information.
Read the letter.
Thursday, September 17, 2015
FinCEN Director: Unusual Number of Credit Unions Not Filing CTRs and SARs
Many credit unions have not filed any Bank Secrecy Act-mandated Suspicious Activity Reports (SARs)or Currency Transaction Reports (CTRs) for the past two years, Financial Crimes Enforcement Network (FinCEN) Director Jennifer Shasky Calvery told a credit union group on Tuesday.
“Some early research we are looking at suggests that we have a surprisingly larger ... statistically relevant and unusual number of credit unions that over a seven quarter period filed neither a SAR or CTR,” she said at a government relations event sponsored by the National Association of Federal Credit Unions. “There could be problems with the data," she added, but called the number of non-reporters “surprising.”
“Some early research we are looking at suggests that we have a surprisingly larger ... statistically relevant and unusual number of credit unions that over a seven quarter period filed neither a SAR or CTR,” she said at a government relations event sponsored by the National Association of Federal Credit Unions. “There could be problems with the data," she added, but called the number of non-reporters “surprising.”
Wednesday, July 22, 2015
Complaints Allege Individuals Gained Control of Small CU to Run Underground Bitcoin Exchange
Unsealed criminal complaints charged Anthony Murgio and Yuri Lebedev with running an unlicensed Internet Bitcoin exchange, which they operated through a phony front-company and, at times, a federal credit union that Murgio acquired for purposes of the scheme.
Since at least late 2013, Murgio, Lebedev, and their co-conspirators have knowingly operated Coin.mx, a Bitcoin exchange service, in violation of federal anti-money laundering (“AML”) laws and regulations, including those requiring money services businesses like Coin.mx to meet registration and reporting requirements set forth by the United States Treasury Department.
In an effort to evade potential scrutiny, Murgio obtained beneficial control of a New Jersey-based federal credit union which served primarily low-income local residents. Murgio then installed Lebedev and others on the credit union’s Board of Directors, and transferred Coin.mx’s banking operations to the credit union, which Murgio, Lebedev and other co-conspirators operated, at least until early 2015, as a captive bank for their unlawful business.
At that time, after discovering that substantial payment processing activity was being conducted through the credit union, the National Credit Union Administration forced the credit union to cease engaging in such activity.
Read the press release.
Read the signed complaint.
Since at least late 2013, Murgio, Lebedev, and their co-conspirators have knowingly operated Coin.mx, a Bitcoin exchange service, in violation of federal anti-money laundering (“AML”) laws and regulations, including those requiring money services businesses like Coin.mx to meet registration and reporting requirements set forth by the United States Treasury Department.
In an effort to evade potential scrutiny, Murgio obtained beneficial control of a New Jersey-based federal credit union which served primarily low-income local residents. Murgio then installed Lebedev and others on the credit union’s Board of Directors, and transferred Coin.mx’s banking operations to the credit union, which Murgio, Lebedev and other co-conspirators operated, at least until early 2015, as a captive bank for their unlawful business.
At that time, after discovering that substantial payment processing activity was being conducted through the credit union, the National Credit Union Administration forced the credit union to cease engaging in such activity.
Read the press release.
Read the signed complaint.
Tuesday, December 23, 2014
Tiny Faith-Based Low-Income CU Under Cease and Desist Order
The National Credit Union Administration has issued a cease and desist order to New Bethel Federal Credit Union of Portsmouth, Virginia.
According to the enforcement order, the credit union is required to:
Read the order.
According to the enforcement order, the credit union is required to:
- Produce source documents demonstrating a certificate of deposit with a local bank is properly titled in the credit union’s name.
- Provide the agency with complete and accurate financial statements and up-to-date member share and loan transactions.
- Obtain a member account verification and independent audit through 2014.
- Charge off all non-performing loans by December 31, 2014 and fully fund its allowance for loan and lease loss accounts.
- Cease granting any new loans until NCUA deems the credit union to be operating in a manner conducive to making sound lending decisions.
- Comply with the Bank Secrecy Act and the USA Patriot Act .
- Ensure internal control reviews by the credit union’s Supervisory Committee.
Read the order.
Tuesday, September 10, 2013
North Dade Community Development FCU Cited for BSA and Money Laundering Deficiencies
The National Credit Union Administration has issued a cease and desist order to North Dade Community Development Federal Credit Union of Miami Gardens, Florida for weaknesses in the credit union's bank secrecy, anti-money laundering, and foreign assets control programs.
The order requires the credit union to stop transacting all business activity for money services businesses not located within the credit union’s geographic field of membership and to suspend transacting business activity for all remaining member money services businesses until an adequate Bank Secrecy Act/Anti-Money Laundering/Office of Foreign Assets Control program is developed and implemented.
NCUA also ordered the credit union to verify that all members are within the credit union’s field of membership; identify all bank secrecy/anti-money laundering/foreign assets control compliance deficiencies; designate a Bank Secrecy Act compliance officer; complete a comprehensive bank secrecy/anti-money laundering/foreign assets control risk assessment; and revise and document board approval for all policies relating to bank secrecy, anti-money laundering, and foreign assets control.
Read the press release.
Read the cease and desist order.
The order requires the credit union to stop transacting all business activity for money services businesses not located within the credit union’s geographic field of membership and to suspend transacting business activity for all remaining member money services businesses until an adequate Bank Secrecy Act/Anti-Money Laundering/Office of Foreign Assets Control program is developed and implemented.
NCUA also ordered the credit union to verify that all members are within the credit union’s field of membership; identify all bank secrecy/anti-money laundering/foreign assets control compliance deficiencies; designate a Bank Secrecy Act compliance officer; complete a comprehensive bank secrecy/anti-money laundering/foreign assets control risk assessment; and revise and document board approval for all policies relating to bank secrecy, anti-money laundering, and foreign assets control.
Read the press release.
Read the cease and desist order.
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