WASHINGTON -- Credit union representatives and their regulator applauded a recent Treasury and Financial Crimes Enforcement Network announcement that it would be seeking ways to streamline Bank Secrecy Act compliance.
Representatives from the credit union community and others subject to BSA were invited to a meeting prior to the release of the announcement. At the meeting, Treasury Secretary Henry Paulson and FinCEN Director Jim Freis outlined a plan to try to ease financial institutions' BSA compliance burden, which surveys have shown is the most onerous for credit unions. The plan would:
-make compliance more risk-based;
-address many money service business-related issues, including narrowing the definition of a money services business;
-put all BSA regulation in one general area of the Code of Federal Regulations; and
-provide more feedback on how the information filed by those under BSA is used.
NAFCU President and CEO Fred Becker attended the meeting. He emphasized that credit unions "want to be a partner in the system", but for smaller credit unions that are not computerized, even a basic current transaction report filing is a challenge because the information is not automatically aggregated.
He added that BSA compliance also needs to be viewed in the broader perspective of all the regulations credit unions are subject to.
NCUA Chairman JoAnn Johnson, who was also at the meeting, praised Treasury's announcement. "NCUA looks forward to working with Secretary Paulson on BSA compliance and commends him on his efforts to find a sensible and achievable balance between the important goal of protecting Americans from terrorism and other crimes conducted through the mechanisms of our financial industry, and ensuring that the burdens of compliance are not excessive or unreasonable for credit unions," Johnson said at the Supervisory Committee & Internal Audit Conference hosted by CUNA and several state leagues. "Last week, in advance of Secretary Paulson's speech regarding BSA, I met with James H. Freis Jr., director of FinCen, to discuss ways credit unions can improve compliance in order to accomplish our mission without imposing unnecessary regulatory burdens." She also noted that NCUA is an active participant in FinCen's BSA Advisory Group.
As for NCUA's own examination process, Johnson stated, "NCUA is striving to match risk-based examinations to risk-based obligations. The Agency recognizes that all credit unions do not engage in the same types of transactions, and that should factor into the examination process. Open communication between your credit union and NCUA is essential in order to meet the challenges and opportunities associated with BSA compliance. Please do not hesitate to share your thoughts openly with your examiners, as improvement of the process is a goal we all share."
Centralize Complaints for Solutions
CUNA representatives also participated in the Treasury announcement. The credit union trade group has recently established a Bank Secrecy Act Task Force to create a central location for submitting and analyzing BSA compliance and cost concerns and work toward solutions.
Harvard University Employees Credit Union President/CEO Eugene Foley is chairing the task force, which plans to hold its inaugural meeting shortly. "Compliance has been a competitive disadvantage, especially for smaller credit unions because the cost is just driving credit unions out of business," he explained.
"Our first move," Foley said, "is rather than CUNA staff hearing random complaints...we tried to channel those into one particular area." That way CUNA staff can review and prioritize the most onerous. The task force's Web site is at http://www.cuna.org/initiatives/bsa/index.html. Comments and questions can be submitted there or at firstname.lastname@example.org. Staff will respond to the question within 24 hours and then it will be shared with the task force.
Foley said he liked the idea of the risk-oriented focus as suggested recently by Treasury, but the devil will be in the details. "We're going to be taking a look at that. That might help us as long as it takes into account the risk assessment that the credit union has," he said.
For example, a tightly knit church based credit union currently has the same BSA requirements as the largest banks. "Those credit unions in particular don't need to do background checks on their members," Foley asserted.
Foley's own $200 million Harvard University Employees Federal Credit Union is "running up a pretty good price tag" on BSA compliance with program updating, a new system purchase, third party auditing and other related costs. He did not have the exact figure.
Additionally, Treasury's recommendation to consolidate the BSA regulations "sounds like a minor thing but it's really important," CUNA Deputy General Counsel and Senior Vice President of Regulatory Advocacy Mary Dunn added, "because you have to look all over for the requirements and it's easy to miss something if they're not all together."
At the FinCEN's announcement event, the task force was invited to schedule a meeting this quarter with Treasury's Financial Crimes Enforcement Network and would like to include Treasury and the FBI as well. CUNA's task force plans on sharing its findings with other regulators and Congress as well.
Other members of the task force include Goldenwest Federal Credit Union President/CEO Shelley Clarke, San Antonio Telephone Federal Credit Union President/CEO Watt Prichard, Mutual Savings Credit Union President/CEO Dale Dalbey, and E Federal Credit Union President/CEO Ed Collins.
Dunn noted that CUNA periodically performs a survey of NCUA examinations and one is due. She said the trade plans to look more specifically at BSA issues with the next one.