The Corporate CU Militia: On the March for Our Country's Security
For the most part, the nation's 30 corporate credit unions operate behind the scenes, focusing on benefiting natural person credit unions in the way of investments, new products and services and technology. However, as September 11th, 2001 changed the world for most of us in many ways, it also altered business within the financial services industry. Now, in our world of color coded alerts, airport security measures and barricaded streets leading to places of political power, corporate credit unions have stepped out front to do their part in the war against terror - and that is to combat terrorist financing. Most of what we read regarding the cost associated with the war on terror involves financing our military operations in Iraq, covert preventive operations at home and in foreign lands and employing security measures to protect innocent citizens as they go about their lives. What you don't read about is the tremendous cost of some of the other requirements of a successful fight, namely, the cost of the financial services industry's effort to combat terrorist financing. Since the enactment of the USA PATRIOT Act, the compliance efforts required of corporate credit unions have been intense. In the past, corporate credit unions were required to have a Bank Secrecy Act (BSA) program, but as a third party processor of wire and cash transactions for credit unions, the onus of suspicious activity (SAR) and cash transaction reporting (CTR) fell to the natural person credit unions. Now, corporate credit unions are required to develop and implement customer identification programs, monitor transactions on a more detailed level, conduct searches for 314 (a) information sharing purposes, to conduct enhanced due diligence, to implement anti-money laundering programs (AML), to ensure proper controls, to train personnel on an annual basis. All this requires human and monetary resources. This is in addition to, and doesn't take the place of, everything the natural person credit must do. I asked various corporate credit unions across the country to describe their efforts to combat terrorist financing as they comply with the Bank Secrecy Act, the Office of Foreign Asset Control's regulations and the USA PATRIOT Act. What I found was an impressive mobilization of resources and human time and energy in an effort to be meaningful soldiers in this war. In the past year alone, Mid-States Corporate FCU formed a new Correspondent Services Compliance Committee. The committee is charged with the responsibility of ensuring that all compliance programs relating to correspondent services meet or exceed NCUA regulation requirements. Mid-States Corporate recently purchased new software and hardware to provide for more sophisticated monitoring of high-risk transactions at a cost of roughly $80,000. Regulatory monitoring within the correspondent services area requires an additional two full-time staff members per year at a cost of over $100,000 per year. Mid-Atlantic Corporate FCU's compliance cost is five times higher than it was five years ago. A position of compliance officer was created. This senior position manages a myriad of compliance issues within Mid-Atlantic and also the consequences for their membership. They have seen a loss of employee productivity that relate to actual services for credit unions because of the need for staff to monitor compliance activities. Mid-Atlantic has also dedicated the financial resources to take a leading role in educating its members as to sound compliance activities. First Carolina Corporate CU believes a successful organization is largely defined by its commitment to its own community, which includes being a good corporate citizen. They have one full-time-equivalent employee dedicated to ensuring compliance with the laws mentioned above as well as another important function, ensuring data security. This corporate also actively assists member credit unions in their own efforts to ensure regulatory compliance. Other corporates with whom I talked stated that usually the responsibility for monitoring compliance gets added to a senior manager's current responsibilities. Some of these senior staff have remarked that they feel like "BSA compliance" is their main job now, and that some degree of member service is being sacrificed. This constitutes a cost that is unquantifiable and especially important for corporates because we are in business to solely serve credit unions. The credit union movement took hold in this country because Americans naturally gravitate toward opportunities that afford them empowerment, independence and progress. It would be unnatural for us to accept any less. When those opportunities are threatened or impeded in any way, we will do what it takes to ensure the benefits we've attained through hard work and ingenuity are preserved. A trademark characteristic of credit unions is a sense of community and that is exemplified in the efforts of corporate credit unions as we strive to protect our members and the interests of the millions they serve.