World Council of Credit Unions once again encouraged theFinancial Action Task Force to limit regulatory burdens oncredit unions. Specifically, World Council weighed in on regulatoryburdens the FATF could relieve when it makes planned revisions toits guidance on the risk-based approach to anti-money launderingand countering the financing of terrorism compliance.

Representatives from the global credit union trade group basedin Madison, Wis., met with FATF members this week in follow-up to aletter submitted to FATF in January addressing the same issues.

Other topics discussed at the FATF private sector participationgroup meeting at the European Banking Federation's Brussels'headquarters on March 25-26 included AML/CFT issues related tomoney services businesses and virtual currencies such asbitcoin.

The FATF is updating its current RBA for depository institutionsguidance paper, issued in 2007, to be consistent with its updatedInternational Standards on Combatting Money Laundering and theFinancing of Terrorism and Proliferation, better known as the “40Recommendations,” released in February 2012.

Comments by Michael Edwards, World Council's vice president and chiefcouncil, verbally supported those made in his Januarycorrespondence to the group.

World Council supports limiting regulatory burdens on small andmedium financial institutions and helping credit unions maintainaccess to correspondent banking services. Credit unions in the U.S.and Great Britain, for example, have found it increasinglydifficult to maintain access to these services since the FATF's2012 revisions to the 40 Recommendations due to increasedresponsibility placed on banks and credit unions for ensuringproper due diligence on their customer's customers.

Under the new rules, a bank or central credit union providingcorrespondent services to a credit union now can be held liable forshortcomings in the credit union's customer due diligence/memberidentification program. Similarly, a credit union doing businesswith a money service business like those that exchange bitcoin can be held liable for problems with the business'sAML/CFT compliance.

Many larger banks have “de-risked” their operations bycurtailing business relationships with credit unions and otherbusinesses that handle funds on behalf of consumers or businesses,World Council said.

Despite existing guidance from FATF and the U.S. FinancialCrimes Enforcement Network, many jurisdictions, including most U.S.states, have not yet clarified how their AML/CFT and otherregulatory requirements apply to virtual currency exchanges andadministrators.

“The U.S. Treasury Department and FinCEN helped write the FATF'sstandards, meaning that FATF guidance gives us a preview ofupcoming Bank Secrecy Act guidance that will apply to U.S. creditunions, sometimes even before the FATF paper is finalized,” Edwardssaid.

Bitcoin exchanges in particular have expressed interest in doingbusiness with credit unions to gain access to wire and automatedclearinghouse systems to settle sales of bitcoins with traditionalcurrency. The lack of regulatory certainty regarding AML/CFTcompliance and licensure for virtual currency operators has madethis difficult.

“FinCEN and NCUA already expect credit unions to apply arisk-based approach to BSA compliance, however the upcomingrevisions to the risk-based approach are likely to make theapproach even more risk-based,” Edwards said. “This should allowmany credit unions to streamline their BSA compliance programs tofocus their compliance resources more on the money laundering orterrorist financing risks presented by particular members, ratherthan follow a check-the-box approach.”

In addition AML/CFT issues, the problems that credit unions andothers experienced maintaining access to correspondent bankingservices were discussed extensively, Edwards said.

“I would be surprised if FATF and FinCEN do not issue guidanceon this subject as well,” he added.