The World Council of Credit Unions urged the Basel Committee on Banking Supervision to strive for greater clarity in its recent “Sound Management of Risk Related to Money Laundering and Financing of Terrorism” consultative document. The Basel Committee’s AML rules are one of the international standards that influence U.S. credit unions’ Bank Secrecy Act compliance requirements.
Specific suggestions included clarification of the term “financial inclusion” as one relating to all members, not just those considered “financially or socially disadvantaged,” according to a Sept. 27 letter by Michael Edwards, WOCCU vice president and chief counsel, to Wayne Byers, the Basel Committee’s secretary general.
Edwards’ letter also asked the committee to clarify that it is not mandatory for institutions to use expensive vendor-created compliance software. He said the cost of such systems sometimes outweighs the potential benefits based on the institution’s complexity and risk requirements compared to anti-money laundering risks and efforts to combat the financing of terrorism.
The WOCCU letter came out most strongly in opposition to implementation and utilization of vendor-created politically exposed persons lists and their blanket usage to screen for AML/CFT violations without consideration of the credit union’s common bond of membership.
“Vendor-created PEPs lists are expensive and often do not provide significant AML/CFT benefits at smaller institution, like most credit unions, which operate in a local community where domestic PEPs are likely to be known to the institution’s managers, and foreign PEPs are unlikely to become members/customers given the institution’s localized business model,” Edwards said.
Limits on membership eligibility exclude most foreign PEPs,” Edwards added.