As many as 30 credit unions in West Virginia and Ohio haveshifted more business to their corporates after a regional andnational bank terminated their correspondent account relationshipslast month.

The $1.4 billion Volunteer Corporate CU and the $3.7 billion Corporate One FCU both reported the closed accounts, and inboth cases said members reported the banks cited Bank Secrecy Actand money laundering risk for the decision.

Charlie Thomas, VolCorp's senior vice president of West Virginia operations, said the Nashville, Tenn.-basedcorporate first became aware of the terminated correspondentrelationships a few weeks ago. He said the two banks were theColumbus, Ohio-based Huntington Bank and New York-based JPMorganChase Bank.

Corporate One FCU, also based in Columbus, has heard the samething from members in Ohio, said Vice President of Marketing PaulHixon. He said the corporate didn't keep count of affected members,but said “several” had contacted Corporate One.

Like in West Virginia, the affected Ohio credit unions hadbanked with Huntington and Chase, and Hixon said another member inFlorida reported receiving a similar letter from Bank ofAmerica.

Thomas said a letter he'd seen from Huntington to a credit unionsaid the decision to terminate the business relationship was theresult of regulatory requirements, “some of which may be new orbeen amended since the credit union opened its account.” Thedecision reflected a change in bank-wide strategy, and was not areflection on the credit union, the letter added.

Hixon reported similar language communicated to Ohio creditunions and added, “Something clearly happened, that all these bankshave closed these accounts at the same time.”

Both men reported some members transferred their correspondentbusiness to their respective corporate, while other credit unionsset up accounts with large credit unions, or found another bankprovider.

The account closures appear to be limited to West Virginia andOhio, according to CUNA Senior Vice President Mary Dunn.

Maureen Brown, Huntington Bank's public relations director, saidthis week that she had investigated the closed account reports butcould not comment on customer relationships per bank policy. Callsto Chase were not returned.

The Federal Reserve Board, which shares BSA regulator dutieswith the Office of Comptroller of the Currency, issued a consentorder against JPMorgan Chase in February that requires the bank totake corrective action to improve its internal procedures formanaging BSA and money laundering compliance. There have been noconsent orders issued against Huntington Bank.

The Fed said it would not comment on whether the two banks hadbeen directed to close the accounts.

According to testimony from Federal Reserve Board GovernorJerome Powell, delivered to the Senate Banking Committee during ahearing March 7, the Fed takes a risk-based approach to BSA andOFAC reviews, and gives exam supervisors “the flexibility to applythe appropriate level of scrutiny to higher-risk businesslines.”

Powell also said the Fed reinforces its supervisory program byconducting targeted examinations of financial institutions thatshow signs of being vulnerable to illicit financing. Banks areselected for such examinations based on, among other things,analysis of the institution's payments activity, suspiciousactivity reports, currency transaction reports and law enforcementleads.