FinCEN Eyes Dozens of Credit Unions
A leaked report from the Treasury Department's Financial Crimes Enforcement Network was the topic of a high-profile report on Tuesday by The Wall Street Journal, which said the agency is scrutinizing more than 50 credit unions that may be particularly vulnerable to potential money laundering.
The confidential FinCEN report did not accuse any credit unions of wrongdoing, according to the Journal, but it did highlight increasing relationships with check-cashing companies and other firms FinCEN calls money-services businesses. Criminal groups and drug trafficking organizations could be targeting credit unions via MSBs to gain access to the formal financial system, it reported.
Actors Federal Credit Union, which is headquartered in New York City, was cited in the article as one of the credit unions on FinCEN's list. Actors FCU has $209 million in assets and about 25,000 members. Bethex Federal Credit Union, which is headquartered in the Bronx, was also cited. Bethex has $15.6 million in assets and about 4,900 members. Neither were accused of wrongdoing.
“Financial services today are filled with complex challenges to which credit unions are not immune, and NAFCU supports sensible regulation and exams that are tailored to actual risks,” NAFCU Senior Vice President of Government Affairs and General Counsel Carrie Hunt said. “The NCUA, jointly with FinCEN and other financial regulators, has issued clear guidance relative to money-service businesses to identify and address potential risks.”
Hunt added, “I will note that NAFCU has expressed concern and questions to FinCEN as to circumstances of the release of confidential information – even though, based on the article, it does not appear that any credit union is accused of wrongdoing or an activity that would require regulatory action. NAFCU opposes any regulation that unnecessarily impedes credit union operations.”
According to FinCEN, which is part of the Treasury Department, people or businesses doing at least $1,000 per person per day worth of currency exchange, or dealing, check cashing or issuing or redeeming travelers’ checks or money orders, must register with the U.S. Treasury as MSBs. Money transmitters of all sizes must register as well.
This is not the first time FinCEN has looked into money laundering at credit unions. In November, the Treasury Department fined the now-closed North Dade Community Development FCU $300,000 for failing to adequately monitor, detect and report suspicious transactions by 56 money-services businesses that were members of the credit union. Those MSBs were in what FinCEN called “high-risk jurisdictions far outside its field of membership.” In that case, 90% of the credit union's annual revenue in 2013 was from those accounts, FinCEN said. The credit union had $4 million in assets and five employees but did $1.01 billion in outgoing wires for MSBs in 2013, as well as $984 million in remotely captured deposits, FinCEN said.
Also in November, FinCEN issued a statement addressing what it said were concerns that banks were indiscriminately terminating the accounts of all MSBs or refusing to open accounts for any MSBs, thereby eliminating them as a category of customers.
“Such a wholesale approach runs counter to the expectation that financial institutions can and should assess the risks of customers on a case-by-case basis,” it said. “Similarly, a blanket direction by U.S. banks to their foreign correspondents not to process fund transfers of any foreign MSBs, simply because they are MSBs, also runs counter to the risk-based approach. Refusing financial services to an entire segment of the industry can lead to an overall reduction in financial sector transparency that is critical to making the sector resistant to the efforts of illicit actors. This is particularly important with MSB remittance operations.”
“FinCEN does not support the wholesale termination of MSB accounts without regard to the risks presented or the bank's ability to manage the risk,” it also said in the statement. “As noted, MSBs present varying degrees of risk, and not all money services businesses are high-risk.”
FinCEN has not said whether it is investigating the leak to The Wall Street Journal.
“I can't comment on any specific investigation, but I can confirm that we take the security of BSA information very seriously and there are criminal penalties for unauthorized disclosure of BSA information,” a FinCEN spokesperson told CU Times. “When disclosures occur, we refer those cases to the appropriate law enforcement agencies for potential criminal investigation.”