As Shared Branching Grows, Networks Act to Standardize BSA Compliance
"We were part of the response from the credit union industry's overall response to the U.S. Treasury's Financial Crimes Enforcement Network inquiry a few years ago," explained Craig Beach, vice president for marketing at CO-OP Shared Branching.
"They were overall very satisfied with our explanation of shared branching and what credit unions were doing to comply with reporting requirements, including in our shared branching transactions," Beach said. "But the CUSCNI wanted to help credit unions standardize their shared branch transaction BSA reporting."
CUSCNI sets standards and procedures for shared branching nationwide that apply to shared branching transactions no matter which network a credit union participates. CUSCNI has representatives on its board from both CO-OP Shared Branching, the subsidiary of CO-OP Financial Services and Financial Services Centers Cooperatives.
The standardized requirements have gained more attention of late because CUSCNI has placed a year-end 2008 deadline for compliance with the new requirements, but Beach emphasized the challenge for credit union shared branch participants was not to introduce any new software or hardware but instead to change how they report things they are already doing.
"Essentially, it's a question of primarily education," explained Beach. "Helping shared branching credit unions standardize the reporting they are already doing."
Beach observed that CO-OP Shared Branch participants might have an advantage over FSCC shared branching credit unions because CO-OP uses the CU-owned Next Generation switch, which carries and shows more information than is required under BSA.
But Sarah Canepa Bang said FSCC had been using a variety of different education methods around BSA for years and plans to continue its effort.
"We're extremely proud of our history helping our members with all their compliance needs associated with shared branching," Bang said. "We are going to continue doing that."
BSA compliance in shared branching transactions can appear more complicated because shared branching CUs can have both their own members conducting transactions at other CUs and need to report the transactions of other CU's members when they use their facilities.
Credit unions whose members conduct transactions at other CUs are called "issuers" in those transactions, and CUs where another CU's members conduct transactions are called "acquirers." This means that a CU involved in shared branching can face reporting requirements for one of its own members, who, for example, might be depositing or withdrawing cash at different shared branch sites that total more than $10,000, as well as reporting requirements if another CU's member makes cash transactions of more than $10,000 at its own branches.
"This can appear complicated, but it's really quite similar to keeping track of deposits and withdrawals over an ATM network," Beach explained. "What makes shared branch transactions different is the human element."
Beach emphasized that the new standardizing requirements do not mean CUs need to do anything new but merely seeks to make sure BSA reporting is done the same way across the shared branch network. He also noted that any BSA requirement CUs might face as part of shared branching have not dampened the growing enthusiasm for shared branching overall.
"Really since the hurricanes in 2005," Beach said, "both networks have seen a steady stream of credit unions stepping forward for shared branching."
Beach pointed out that while shared branching participants face specific regulatory guidelines and some standardization, shared branching provides a much-needed service for members, giving them convenient, face-to-face account access at 3,400 branches nationwide, including 120 locations worldwide. Shared branching allows credit unions to strategically widen their footprint overnight to enhance their service relationships and better compete against other financial institutions, he added.