Defense CU Council, Fort Belvoir, Va., has named Jacqueline Connor, marketing director at Fort Belvoir FCU, the 1999 George E. Myers Scholarship recipient. Connor will use the scholarship to attend the Credit Union Executives Society's Executive Marketing Institute, which provides advanced curriculum on CU marketing issues. Connors, FBFCU marketing director since 1995, launched the FCU's Web site. The George E. Myers Scholarship began in 1996 in honor of former DCUC President George E. Myers. The Council, created in 1963, is comprised of 281 Department of Defense related CUs, with more than 10 million military and civilian members. Founders FCU, Lancaster, S.C., officials have announced that the FCU will donate $100,000 to Winthrop University for business scholarships. The scholarships will support a course that includes a 10-day summer trip during which recipients will be able to study the Federal Reserve and the Securities & Exchange Commission in Washington, as well as Wall Street brokerage houses and the stock exchange in New York. To thank Founders for the gift, university officials plan to name the Thurmond Hall multimedia room 308 the Founders FCU seminar room....

Central Florida Educators FCU, Orlando, has announced the relocation of its real estate lending offices. Assistant V.P. of Real Estate Lending Jeff Peters and other staff has moved from the FCU's main branch to the CFEFCU Member Service Center at 1823 N. Alafaya Trail. Double Eleven CU, Indianapolis, has awarded its $1.83 million contract for a new main office building to HBE Financial Facilities. NJDOT CU, Trenton, N.J., held a grand opening celebration for its new downtown office adjacent to the DMV building. Reynolds Carolina FCU, Winston-Salem, N.C., officials announced earlier this year that they would break ground on a new 85,000 square-foot administrative building in spring. The new three-story facility housing about 150 members and a branch office to serve members will be on 10 acres near the intersection of Hanes Mall Boulevard and S. Stratford Road. The facility is scheduled for completion in September of 2001. Safe 1 CU, Bakersfield, Calif., staff and members have celebrated the ground breaking for their new 16,000 square foot home office in Southwest Bakersfield at 1400 Mill Rock Way, near the Marketplace. Security Service FCU, San Antonio, among the top 20 largest credit unions in the nation, has broken ground for a new 128,000 square foot facility that will house all corporate offices in one building upon completion, which is scheduled for May 2001. SSFCU serves 385,000 members....

Wisconsin CU League, Pewaukee, will name a Political Activist of the Year at its May convention to highlight the importance of grassroots activities in pursuit of legislative goals. Eligible for the new award will be CU employees, volunteers, or a CU or group as a whole. Georgia Maxwell, WCUL director of government affairs, said that CUs have done a lot to reach out to legislators considering the CU Consumer Choice Bill, AB573/SB274, which passed the Senate in February. Nomination deadline for the new award is April 10. Sunmark FCU, Schenectady, N.Y., has named Shelli Polito their 1999 Employee of the Year. Shelli received a standing ovation after the award was announced during the FCU's 5th annual Employee Recognition & Service Awards Dinner. Nominees for this award are chosen on the basis of dedication to member service, job knowledge, loyalty to the FCU and team work, officials said. Travis CU, Fairfield, Calif., has been selected the winner of the "2000 Best Place to Bank in Solano County" by readers polled by the Fairfield Daily Republic. TCU has headquarters in Vacaville. It serves 113,000 members and has $803 million in assets....

Two years after converting to a mutual savings bank, the former I.G.A. realizing life as a publicly traded company is not all roses.............................................Page 3...

Fair, Isaac disputes E-Loan's policy to divulge credit scores to consumers..Page 11...

TALLAHASSEE, Fla. - In May 1999-for the fourth consecutive year-the state legislature adjourned without passing title loan reform legislation (CU Times, May 12). One month into the 2000 session, state legislators are going for a fifth try. Senate Bill 1834c1, creating the `Fair Accountability in Interest Rate Act of 2000" was introduced on the opening day of this year's Florida legislative session (March 7) by state Sens. Jack Latvala (R-19), Kendrick Meek (D-36), Patsy Ann Kurth (D-15) and Burt Saunders (R-25). The measure was referred to the Senate Governmental Oversight and Productivity Committee where on March 15, it was combined with committee substitute bill S. 694, the "Florida Title Loan Act" sponsored by Meek. Among its provisions, S.694 caps interest rates on title loans at 30% per annum on the first $2,000 of the principal amount, 24% per annum on the remainder of the loan exceeding $2,000 and not exceeding $3,000, and 18% per annum on that part of the principal amount exceeding $3,000. The maximum annual percentage rate of interest that can be charged is 12 times the maximum monthly rate, and the maximum monthly rate must be computed based on one-twelfth of the annual rate for each full month. A title loan agreement may be extended for one or more 30-day periods as long as the lender and borrower mutually agree. Each extension of a title loan is considered separate from the previous agreement and the interest rate charged cannot exceed the rate charged in the previous agreement. In addition, S. 694: * Requires title loan lenders to be licensed by the Florida Banking & Finance Department. A separate license must be obtained for each title loan office if the lender operates more than one office. Licenses are valid for a maximum of two years and must be renewed biennially. * Licenses must be conspicuously displayed at the title loan office. * The maturity date of a title loan agreement is 30 days from date of execution. Though S.694 was only a little more than two weeks old when Credit Union Times went to press, Mark Ivester of the Florida Credit Union League said the chances for passage of a title loan act by the state legislature were excellent this year for two reasons. First, the main opponent to previously defeated title loan bills, Sen. W.D. Childers (R-Pensacola) has publicly stated he has no interest in this year's title loan measure. Second, this year's title loan bill not only has the backing of the state Senate - none of the previous bills did - but it also has the support of both the Senate President Toni Jennings (R-9) and the Chairman of the Governmental Oversight and Productivity Committee Latvala. So far, since the state legislature adjourned last May without passing a title loan regulatory act, more than 30 counties throughout Florida have passed their own ordinances capping title loan interest rates. Most of the caps are 30% and a handful are 18%. Ivester stressed that "the league has no position what the maximum interest rate that title loan lenders should be. It would be presumptuous of us to suggest how another business should be regulated. The only thing we do know is that what amounts to 264% annual interest Florida law currently allows is too high. The league's main goal is and always has been to go from there being no regulation, which describes the current status, to where the title loan industry is regulated by the Department of Finance." S. 694 is one of two bills working their way through the Florida legislature. On the House side. Rep. Bill Sublette (R-Orlando)-the sponsor of last year's H.B. 299 that would would have capped title loan interest rates at 30%-has sponsored another bill this year - H.B. 301. At press time, the bill was in the House General Government Appropriations Committee. The House and Senate bills are virtually similar, except that S.694 is paired with another bill sponsored by Sen. Meek-S.B. 2278-pertaining to check cashing businesses. That bill would make it unlawful for a check casher to "charge a customer for holding a cashed check and may not seek criminal prosecution for the failure of a customer to have funds in the customer's checking account to cover the amount of a check on a business day subsequent to the date the check is cashed." Sublette said he hopes Meek's check cashing bill doesn't threaten passage of S.694. If it comes down to sacrificing the check cashing bill for the sake of S. 694, then he will encourage Meek to do that, "but I hope it doesn't come down to that." "There is no doubt we will have a title loan law passed this year by the state legislature," said Ivester. Any time a bill has this kind of backing, it's chances of being passed are better than excellent." Sublette is also hopeful the legislature will pass the measures this year. "Our chances this year are very good, in fact I would be surprised if title loan lending legislation didn't pass this year." -...

WASHINGTON-There's a lot of green in the Black Money Market, judging by the "conservative" estimate of near $600 billion Treasury Deputy Secretary Stuart Eizenstat put on the magnitude of money laundering in testimony before the House Banking Committee on March 9th. Calling it a serious threat to our country because it "facilitates drug trafficking, organized crime and international terrorism and because it encourages corruption in foreign governments, undermining U.S. efforts to promote democratic institutions and healthy economic development internationally," Eizenstat saved its most essential threat to American (and presumably world order) for last, when he summed up: "Money laundering also poses a threat in and of itself, because it risks undermining the integrity of our financial system." Because credit unions are part of that financial system, and seek to become even greater players by gaining a bigger market share of the asset pie and more expansive business lending powers, they may have to pay closer attention to areas that didn't seem to involve them before. And when a Website that specializes in offshore asset protection advertises that an individual can "buy" a credit union in an Eastern European country, "without having to provide detailed documentation of professional experience, assets, etc.," and announces that it is "Almost like printing your own money!" then both the American and International credit union movement may have to take notice. Because the financial system is based on the perception that the huge economic web is well-woven through honest, voluntary participation both by individuals and institutions and diligence on the part of supervising agencies and other government entities, a massive strategy of how to fight money laundering unveiled recently by the Treasury and Justice Departments dovetails with an effort to close corporate tax shelters (see related stories). Meanwhile, anti-money laundering bills await congressional action, and banking, insurance, securities and credit union lobbyists are monitoring and evaluating the impact of any proposed rules and regulations such legislation may impose. Because of its hard-won congressional battle with bankers over CU fields-of-membership and its higher profile on Capital Hill and in media circles that cover the financial industry, CUs would unwisely dismiss the notion that they can't be hoodwinked by crafty money launderers, tax evaders and Internet scammers, warn fraud experts. That White Hat the movement wears could be quickly tarnished by only one such scandal like the Bank of New York affair. Credit unions aren't typically mentioned in the conversation when the topic turns to laundering money, especially when the technique involves making large cash deposits (or other cash-equivalents) to accounts in "offshore" financials so they can be redeposited (via a correspondent relationship) in an American financial institution. In fact, all of the really bad publicity surrounding money laundering specifically relates to large banks. Just because their prime field-of-membership is natural persons rather than business accounts doesn't make CUs immune, say experts, and those CUs with considerable business lending portfolios may need to be more aware of the problem. As worldwide money transfers are made easier, the international credit union movement may need to be more vigilant, and with good reason. Money laundering has been chiefly associated with drug profits, but the desire of the wealthy to avoid taxes and/or shield a source of income from scrutiny is also a reason for the burgeoning "offshore" asset protection market. Combined with the lightening speed of the Internet, and some countries' lax regulatory oversight of banking regulations, the profile of credit unions could change. An Internet site (www: offshoreprofit.com) has been offering the sale of a credit union located in a European Union country, for the bargain basement price of only $19,800. The FAQ (frequently asked questions) sheet on the CU sale offer promises that the CU can take deposits, make loans and issue guarantees; issue bonds, letters of credit; offer leasing and payment services; issue payment tools like checks and cards; market insurance; trade in foreign currencies; offer credit reports; issue bank references and certificates of deposit, credit cards; advertise worldwide and solicit funds from the general public. The offer "comes complete with two correspondent bank accounts. One in the same country the CU (bank) is registered in and one in either another European country, or in the Caribbean, or in the U.S., depending on your requirements." Because European CUs are not tax-exempted, the FAQ notes that "if you use it together with a offshore company there does not have to be any taxable profit in the bank. This bank is actually a superior tax-planning tool. Because the country isn't a "famous tax haven," it is a "perfect first stop when funds are to be transferred offshore. If you need to transfer funds back `onshore...' you simply grant yourself or your offshore corporation a loan, and of course you are not paying taxes on a loan." They offer directors for a mere $2,000, who will "front on all documents and the client gets a power of attorney." If that isn't acceptable, they will provide an EU street address the owner can use. Calling a CU the "most powerful business tool money can buy," didn't sit well with Dave Grace, Financial Information Services Officer with the World Council of Credit Unions in Madison, Wisconsin. "Just like in the United States, European credit unions are cooperative institutions that cannot be bought by individuals. That alone troubles us," said Grace of the CU for sale offer. "I guess I'd have to spend the money to find out what country they're talking about, but that would mean spending near $20,000 plus the cost of directors in order to find out," he added. Grace noted that some of the powers promised are unlikely, such as being able to deal directly in securities, but expressed a real concern over the possible harm that could be done to credit unions' reputation if this sort of offer was indeed taken at face value and resulted in some scandal. "I'm not overly concerned, because the whole Website is just so rife with potential fraud that it's evident what it's all about. But we are concerned over possible damage to the credit union name, and we will make inquiries with our European counterparts," he said. (The site offers alternate sources of passports and other identification material, untraceable credit cards and myriad offshore banking information. At press time, the site was offline, but some fraud experts CU Times consulted logged on before it went down, and most agreed with Grace's take on it.) "This stuff just amazes me," said Barbara Loescher, a former CU fraud investigator with CUNA Mutual and a CPA, who now conducts CU fraud conferences. "I can see drug dealers taking big advantage of this; but what would they call it, "Drug Dealers FCU?" she laughed. "But this isn't funny, even though it seems preposterous. "The FAQ notes that you can't call it an FCU, but you can call it a `Sparkassa' which may be a Scandinavian reference, say, Sweden or Denmark, or you can call it a `bank.'" Whatever its called, it's sure not what the CU movement intended, said Loescher, after looking at the Website and reading the FAQ. "This is clearly for someone who has lots of money and wants to hide it, or for those seeking to launder money. The `Freedom package' they offer includes a new identity, a passport and all this other stuff that law-abiding folks wouldn't be interested in. It's about tax avoidance and money laundering, period." But the website's author claims that privacy issues, government malfeasance and irresponsible spending of taxpayer monies justifies an individual's every effort to keep as much of their hard-earned cash as possible; and it's all within the law. Yet Loescher was amazed at the boldness of the offer. "Create banking references? What, to sell to all your crooked friends? Now I've seen everything." About the potential for damage to the CU reputation, she rued, "It's too bad, because credit unions in these developing countries are in the early stages and could do a lot of good for citizens. It could be bad if legitimate credit unions are associated with this kind of thing." Rosemary Brady-Hardiman, a Springfield, Va., attorney who does legal work for CUs observed that it was clearly a money-making venture. "They earn money by selling information and providing directors, relicensing agreements, etc., but it looks be a money laundering or tax avoidance effort or a combination of the two." The FAQ boldly promises that the CU is a "nice way of legally funneling profits offshore and minimizing taxes! Once you sign up, we will show you a unique insider strategy of how to reduce your taxload and even say goodbye to taxes forever." A CU owner might "buy out your own debt for a song, stage your own `friendly self-takeover' and make exorbitant profits, absolutely legally, too, provided you know the proper way to do it." All of this comes after years of research done by an international team of financial privacy experts, they advise. Michael Zeldin, former chief of the United States Department of Justice Money Laundering and Asset Forfeiture Offices, now a partner with Pricewaterhouse-Coopers in Washington, called the site a "fraud vehicle" and said there were several others sprouting on the Web. He indicated that the typical smaller credit union, (and CUs in general) with their emphasis on personal service and friendliness might indeed prove an easy target for money launderers. "They have smaller staffs who must multi-task. They don't have a dedicated compliance officer that learns the tricks played by launderers. Not meaning any insult, but they aren't as `sophisticated' as the larger banks, they can't be. In fact, that is the charm of credit unions. Once you join, say, through some associational group, they tend to accept you." Zeldin warned that the greatest vulnerability to laundering lies in the ethnic-based CUs, whose members typically send cash to their home country. "Especially where cultural beliefs consider it impolite to ask about the source of money," he noted. Accounts are not state guaranteed or insured, they say, because that would mean "state control would be more or less totalist." And this isn't a bogus deal because a CU is fully entitled to all these monetary operations as long as they pertain to members only. Liquidity is not a concern either, because there is a "lack of laws in this specific area." Yet as in all EU countries, all "criminal" activity must be reported, and large cash transactions must be reported. But it's all legal, they say, for an "entrepreneur with foresight (and the right advisors) to set up his financial operation, including loans and mortgages in such a way that the credit union he does not `formally' own (but controls) becomes his major creditor..." But Robert Smith, principal of offshoreprofits.com, in an e-mail exchange with Credit Union Times responded to concerns about the laundering issue. "I'm concerned that the words "launder money" and "avoid taxes" are mentioned in the same breath.What's so bad about avoiding taxes? Many people have been brainwashed into believing that tax avoidance is illegal... but it isn't.''. As for dealing with `real' criminals, we're probably more picky as to who we do business with than most other offshore service providers. We do require professional references, bank references and notarized identification from all our clients to ensure that this opportunity does not get into the wrong hands. Every now and then we do receive `questionable' applications but trash them immediately," said Smith. -...

SALT LAKE CITY - The grassroots fight to ensure growth of Utah credit unions and to demonstrate new political muscle in state politics was stoked hard March 17 and 18 by the Utah League of Credit Unions at its annual convention here. From keynote speeches to breakout sessions, the theme of the annual conference was political "renaissance" for CUs in the state eager to show new-found legislative strength to beat back the powerful banking lobby which a year ago enacted restrictive field of membership curbs on multi-county expansion. "Let me give you some advice," intoned State Rep. Susan Koehn (R-Salt Lake City), the retiring chairman of the House Rules Committee. "You are most effective when we hear from those constituents who are well educated on the subject at hand and can engage in a dialogue instead of giving us a scripted message." The Salt Lake City lawmaker was referring to orchestrated business lobbying campaigns in which sometimes poorly-informed employees phone or e-mail lawmakers with identical or repetitive messages obviously written by others. "Sure, quantity is good," acknowledged Rep. Koehn, but "guerilla tactics in which lawmakers are threatened do not work well." Without exactly defining "guerrilla tactics" or identifying who was at fault, she did say the bruising CU-bank battle in 1998-99 left plenty of scars and created among lawmakers a "bunker mentality." In that kind of mental framework, she said, legislators stick together in their voting patterns as they try to thwart whatever industry is most threatening. "I suggest a gentle and reasonable" approach in pushing bills, she said speaking during a convention panel, "which will be more well received in the future." She added also that CUs need be more upfront about their tax-exempt status. CUs, she observed, have a good case in demonstrating their service record and the reasoning behind their tax exempt status but in some cases it has been seen as a "brick wall." One of the conference highlights was a keynote luncheon speech by the state's Democratic candidate for Utah Governor, William Orton, a former U.S. Congressman from Provo and a six-year member of the U.S. House Banking Committee. Orton, who is in a tough uphill fight to beat popular Republican Governor Michael Leavitt, who was invited to speak at the conference but was unable to because of previous commitments, was introduced by League President Scott Earl as being "a staunch friend of credit unions." Orton joked with the crowd. "I don't mind taking his place" in speaking to the gathering as he went on to criticize Gov. Leavitt's close ties to big business in the state as well as the governor's campaign finance practices. The 51-year-old Orton, who is a tax attorney and now lives in North Ogden, told convention attendees he is now a member of America First Credit Union of Salt Lake City and has been a CU member since he was 16 when he joined his father's federal CU while working on the family farm. While decrying special interest pressure on lawmakers, Orton confessed that "I'm in love with a lobbyist and I sleep with one every night" referring to his wife, the former Jacquelyn Massey, who he met through his work on the House Banking Committee. Massey is former associate chief of legislative affairs for the National Association of Federal Credit Unions in Washington. Underscoring the political theme of the conference were introductions of credit union executives who are running for office in state races. Indeed, there were eight CU executives who stepped forward to announce they are already in House or Senate contests. Since the 1998-99 fight with banks over FOM restrictions arising from the national battle over H.R. 1151, the Utah League of Credit Unions has worked tirelessly to build the CU profile among state lawmakers by electing some of their own. A special booth at the League convention was open for CU executives to sign on as volunteers or to pick up campaign literature for the various races. Among the CEOs in state races is Curtis Doman, president of Granite Credit Union in Salt Lake City and a Republican running for a state Senate seat. In addition to the candidates' booth, convention attendees were given a primer by a group of state political consultants and lobbyists on how to prepare for state caucuses, how to become a delegate and how to participate in local conventions slated this spring. In her remarks, Rep. Koehn told CU executives they need to start early in the political process to get their legislative message out to lawmakers. "You need to spell out the issues clearly, but don't scare legislators," she warned. Earl said he would be canvassing the membership in the next few weeks to determine the league's exact positions on FOM, business lending and other issues. "We don't want to head in different directions and so we must decide what we want to go for" in terms of proposed bills before the next session, said Earl. One Salt Lake City consultant on the legislative panel, Caroline Roemer, told the League that visits with state lawmakers has convinced her that "credit unions are becoming a voice" following the big initiative battle over FOM and H.R. 1151. "You can expect to be heard," she said. Echoing that view was Travis Wood, the League's new vice president of government relations, who forecast that because of higher political involvement by CUs across the state "you have a better shot next time around" of winning favorable treatment by Utah lawmakers. Wood's appearance on the panel was also his first day on the job. He formerly was a legislative staffer for the Utah Public Employees Association In a separate swipe at Gov. Leavitt's failure to appear at the meeting and citing CU political clout in the state, Roemer told the gathering "Leavitt should be very concerned he wasn't here today." -...

...

WASHINGTON-The Departments of Treasury and Justice recently unveiled the Clinton Administration's National Money Laundering Strategy for 2000, a broad approach to reverse and control what they posit as a growing menace to the country's financial system. The plan is a layered comprehensive plan to combat and prevent the huge profits generated by the illegal drug trade and other criminal activities from entering the monetary mainstream and bypassing tax responsibility. It designates, for the first time, what are termed four "High Intensity Financial Crime Areas" for the United States- New York/New Jersey, Los Angeles, San Juan, P.R. and the Southwest Border. It also brings other financial service providers into the regulatory and oversight picture. A final rule issued by FINCEN, the Financial Crimes Enforcement Network, a unit of the Treasury Dept., would require money services businesses, such as check cashers, money wiring services and currency dealers to submit suspicious activity reports (SARs). Later this year, it is expected that casinos and card clubs will be included, and the Securities and Exchange Commission will act to add broker/dealers to the list of those commercial operations that must report activities that generate suspicion. This isn't a replay of the failed "Know Your Customer" proposal that was so strongly bashed last year, promised Treasury Secretary Lawrence Summers. "It takes both cops and bankers to stop money laundering," stated Summers in an interview with U.S. Banker. A big concession there was to craft the way financial institutions oversee the accounts of bank customers together with trade groups and considering the admonishments of privacy advocates. By including all comers to the planning and strategy, the administration hopes to garner wider participation and cooperation. Having the force of suggested guidelines together with some rules, a more comprehensive approach may prove successful. "Money laundering is a growing threat to the United States," said Deputy Treasury Secretary Stuart Eizenstat. "It undermines confidence in the integrity of our financial systems, facilitates crime and corruption, and allows criminals to savor the rewards of their illegal actions." "The legislation we are proposing today would fill a crucial gap in our authorities, and significantly enhance our ability to take calibrated, targeted action with respect to money laundering threats posed by foreign jurisdictions, institutions, or transactions," said Eizenstat in testimony before the House Banking Committee. The threat posed by those jurisdictions includes some that have a loose regulatory approach to "offshore" oversight (see related story on page one). Summers stated that most of those operations are entirely legitimate, but may be abused by money launderers. The ability to narrowly focus on areas of abuse is key to the success of the 2000 strategy, he said, if jurisdictions that "construct their regimes in defiance of international money laundering norms, thereby attracting dirty money" are to be stopped. -...

MAITLAND, Fla. - Plastic packing Americans are using their ATM/debit cards approximately four times a week according to a Star Systems survey. The comprehensive survey of 8,486 financial account holders in 21 states showed that each month ATM/debit cardholders use their cards about 16.8 times, or four times a week. Point-of-sale transactions account for about half, 7.9, of the 16.8 ATM/debit transactions consumers make a month. One of the reasons for the growth in debit usage at POS terminals appears to be the presence of a PIN. Fifty percent of those polled said they prefer the PIN-based transaction, while 31% prefer the signature-based transaction. Fifty percent of those who prefer the PIN-based transaction said protection from fraud is the major reason. Asked about electronic-based services they would consider using, consumers said they would consider using home banking if the system was PIN-driven. Sixty-eight percent of those polled said a PIN was "very important" for them to do home banking, while another 15% called it "fairly" or "somewhat" important. Star Systems also announced that it processed a record 2.3 billion transactions in 1999. That number was helped by its merger with the HONOR Network a year ago....

JACKSONVILLE, Fla. - Health Services Credit Union has deposited $5,000 in a special reward fund for "information leading to the safe return of Tina McQuaig," a member of the credit union. McQuaig has been missing since leaving work at Shands Jacksonville-one of HSCU's select employee groups-on March 15. Wendi Arthur, vice president for HSCU is asking other area credit unions and financials to contribute to the reward fund to "help get this young lady back to her family." Contributions may be made to: Reward Fund, HSCU account number 56854, at any HSCU office; the Shands Jacksonville office on 8th Street; the Mayo Clinic on San Pablo Road; Blue Cross and Blue Shield, Riverside Ave.; Memorial-Brooks Hospitals, University Boulevard; St. Vincent's Health System, Barrs St., and the HSCU home office in Deerwood Park. For additional information, call Wendi Arthur at (904) 996-7430....

MADISON, Wis. - The World Council of Credit Unions (WOCCU) has received a $170,000 (U.S.) grant from the British Know How Fund, a program of the Department for International Development, to enhance the safety and soundness of an emerging Moldavian credit union system in eastern Europe. Over the course of a one-year project, WOCCU will provide technical assistance for strengthening the Moldavian State Supervisory Service of the Savings and Credit Associations of Citizens (SCACs). The project is intended to further develop and strengthen the legal, regulatory and supervisory framework that supports SCACs. Specifically, WOCCU will work with the State Supervisory Service (SSS) to design and implement an examination system; review SCAC legislation and recommend changes that encourage safety and soundness; assist in the development of norms, standards and rules consistent with the banking system and cooperative principles of a savings and credit union system; and develop a business plan for the SSS to set up parameters for development adequate capacity to supervise 350 to 400 SCACs....

WASHINGTON-Federal Reserve officials on March 21, acting on concerns that the nation's ballooning economy and a tight labor market might lead to inflation, raised short-term interest rates as widely predicted, by a quarter-percentage point and indicated that more such moves are likely if growth doesn't slow to more acceptable levels. The action by the Federal Open Market Committee, the central bank's top policymaking group, was the fifth such increase since last June. The federal funds rate, the interest rate financial institutions charge each other on overnight loans, went to 6%. The Federal Reserve Board separately increased the discount rate- what financial institutions pay when they borrow directly from a Federal Reserve Bank- to 5.5% from 5.25%. Almost immediately, banks began to pass along the increases by ratcheting up their prime interest rate to 9%. Consumers will consequently see an increase on the interest rate they pay for home equity loans and credit card balances, which are generally tied to the prime and hover, usually 3% above it. Making the cost of funds go up is meant to discourage borrowing, and thus reduce spending, but whether that will happen or not is an outcome many economists and analysts cannot predict. Americans are on a spending spree, as figures announced by the Commerce Department bear out. So while the robust American economy continues its expansion, prodded, say analysts, by rising oil prices and demand for imported goods, the trade deficit soared to $28 billion in January. Not all market and monetary policy experts are approving of the Fed's incremental approach to boosting rates-at least absent an obvious inflationary threat. "Alan Greenspan is playing the most dangerous game of his life," said investment analyst and frequent credit union conference speaker Frank Cappiello, to an audience recently in Palm Beach, Florida. Speaking to an audience at The Society of the Four Arts, he was quoted in The Palm Beach Daily News as stating that "He is in a situation that, if he goes too far, it will be irretrievable." Where that irretrievable point lies however, even Cappiello cannot say, adding that the Fed is not the sole determinant of what the soaring stock market will do. But he offered one sure thing as a reminder to those who may temporarily forget Newton's law: what goes up must come down. The high-flying tech stock indexes were balanced of late by a resurgent Dow Jones average, bringing some old-world common sense (and investor dollars) back into BlueChips, say analysts. But it all could end very quickly, Cappiello said. "The question we all have is when will it end and how will it end, for end it will. We all know that." -...

WASHINGTON - Reaffirming his commitment to cracking down on predatory lending by national banks, Comptroller of the Currency John Hawke Jr. at the same time admitted the agency is limited in what it can do because sub-prime lending to consumers with spotty or poor credit histories is legal, albeit "deceptive and unfair." Speaking at a conference sponsored by the National Community Reinvestment Coalition, Hawke said the OCC planned to issue an advisory to examiners reminding them "to be on the alert for patterns of predatory lending." He noted that the advisory is intended "to heighten our examiners' awareness of the fact that a predatory lending environment presents a high level of risk for discrimination." While regulating predatory lending is one solution to the problem, Hawke emphasized that, "We must target not just the predators themselves, but the conditions that allow them to flourish. That means encouraging responsible competition in the same markets in which the predators operate."...

LAS VEGAS-Barbara Loescher & Associate's annual conference on fraud prevention for the credit union industry is scheduled for August 9-12 here in the nation's gambling and family vacation mecca. Caesar's Palace will host the program, meant to educate CU auditors, supervisory committee members and loan and compliance specialists to the scams and schemes that surface through investigation and how to spot them before they do serious damage. Registration is $645 before June 6, and includes all materials, continental breakfasts, lunches, a welcome evening reception and a closing dinner. A regional seminar is also planned for April 13 in St. Louis, Mo. For more information, call Loescher & Associates at (608) 278-0465....

VIENNA, Va.- Navy Federal Credit Union responded with a full-volley against charges that its members credit and debit cards were susceptible to fraud after an Internet Web site (CD Universe) was hacked and card numbers downloaded to another site. Online news service MSNBC accused NFCU of doing nothing to protect their members' cards, and that raised the hackles of the credit union's fraud and security experts. A European hacker still being sought by investigators, who tried to extort money from the the e-commerce site that sells music on the Net made good on a promise to list the card numbers, where they would be vulnerable to fraud. But Tom Steele, vice president of the CU's credit card division told Credit Union Times that of the 445,000 cards that were hacked, only 1,500 were NFCU members. When the initial break-in was reported by Visa and MasterCard authorities to their networked financial institutions in January, the CU ran all cards through their in-house fraud software and neural network operations (NFCU uses Falcon and other systems to check for irregular card usage). The result? "Nothing was going on," said Steele, therefore, he didn't think a total card reissue was necessary. "We always take appropriate action when necessary, and continually monitor for fraudulent activity, but we also do not want to unduly alarm our members. Likening the press-mess to a "tempest in a teapot," NFCU public relations manager Loren Moeller sprung into action, refuting the charges raised by MSNBC, which were based on an anonymous source. By day's end, the site reflected the lessened threat and presented the CU's version of events. The moral of the story, she said, was for CUs to monitor news sources, prepare a response quickly, and refute the charges with facts....

ALEXANDRIA, VA.- The NCUA has issued a prohibition order against William Bruce Kay, former President/CEO of CU Master Insurance Services Inc., the credit union service organization of the Hughes Aircraft Employees Federal Credit Union in Manhatten Beach, California. Kay pleaded nolo contendre (no contest) earlier this month to charges of grand theft and was sentenced to serve one day in prison, three years probation and 300 hours of community service. Upon completion of his punishment, he may not serve in any capacity for a federally chartered financial institution without prior permission. Credit Union Times learned from sources that Kay was terminated by the CUSO's board of directors in December, 1998 after investigations turned up questionable transactions and expenses in CUSO operations controlled by him. Restitution was also part of the plea arrangement. Sources say the cost of the activity was minimal, and together with a satisfied bond claim, there was no loss to the CUSO or the credit union. -...

WASHINGTON-Money laundering isn't the only thing on Treasury's mind these days, even as the Internal Revenue Service readies for the April 15 filing date for payment of federal income taxes. Targeted are corporate tax shelters that Treasury Secretary Lawrence Summers termed the "most serious compliance issue threatening the American tax system." New rules would require companies to disclose tax shelters on their returns if any two of six suggested conditions are met, including if a fee of $100,000 was paid to an outside firm that helped to create a shelter. Some Wall Street companies have specialized in that approach, marketing the shelters as tax-avoidance bonanzas. Insurance companies have also recently pleaded with some members of Congress to stop companies from relocating to Bermuda for the express purpose of not paying taxes. Big players like Hartford, Chubb, Kemper and Liberty Mutual want the loophole closed because it disadvantages their own stateside operations, they say....

I was there and I have to ask, "Was D'Amours' GAC speech really that bad?" As I heard it, he addressed three issues: credit unions' drift away from their original purpose; the need to serve the underserved; and the diminishing role of credit union volunteers. There is no question that predatory growth tactics exist and I do question why some credit unions act as they do. As for serving the underserved, yes that is a favorite topic of the Chairman, but at the GAC, Rep. Jim Leach and NCUA Vice Chairman Yolanda Wheat said essentially the same thing. I see nothing wrong with our governing agency putting the heat on us to serve a portion of the public that does get left behind. Maybe it isn't the role of the NCUA to sing this song, but if it makes credit unions do it, then I call it a success. Regarding the lack of unpaid volunteers on the CUNA board, I actually agree with D'Amours on this one, to a point. Would it be a horrible thing to have some volunteers on the CUNA board? No. Could they save one to four seats for just volunteers, as they do for league presidents and different size credit unions? Yes. Would it make a big difference? No. I do agree with critics that his choice of location to make this particular speech was questionable, but the fact that the Chairman continues to push for these topics, I believe, is a plus for our industry. It keeps the topics hot and forces others to discuss them. Mark G. Mahoney President/CEO Chicago Police FCU...

Credit Union Times Vol. 1, No. 1...

When the Office of Thrift Supervision proposed regulations requiring savings associations to develop and maintain Know Your Customer programs, the intent was to reduce the likelihood that savings associations will become unwitting participants in illicit activities, such as money laundering. The regulations would have required banks and savings associations to determine the true identities and legitimate activities of their customers. After much public comment opposing the regulations as burdensome and intrusive, the OTS has decided not to go forward with implementation. But the fact that it even proposed them - and that the other regulatory agencies (though not the NCUA) are drafting similar rules - is an indication that money laundering is becoming an ever-increasing threat. It is virtually impossible to determine exactly how much ill-gotten money is laundered each year, but according to the Federal Bureau of Investigation, it could be as much as $500 billion. For the sake of perspective, the top three companies on the Fortune 500 list, General Motors, Wal-Mart, and Ford produced $445 billion in revenue combined. Of course, they paid taxes; the money launderers didn't. Generally speaking, credit unions have not been targeted for money laundering purposes. As a matter of course, credit unions have traditionally known their members and their depository habits better than big banks. But times change, and as the Internet homogenizes financial services, and crooks are driven from traditional money laundering venues, credit unions and other financial institutions could potentially begin seeing themselves the targets of money laundering schemes. The good news is that the techniques used for money laundering haven't gotten any more sophisticated, and with a little training, frontline staff can spot the trends crooks use. The following excerpts from the Financial Action Task Force Report on Money Laundering outline some of the more common strategies for laundering money, and what frontline staff should look for it detect these strategies. FATF is a 26-nation organization created by the Group-of-Seven industrial countries to address the global problem of money laundering. While no significant new methods of money laundering have been identified, there continues to be changes in the relative use of the various money laundering methods, and in particular there was a continuing trend for money launderers to move away from the banking to the non-bank financial institution sector. A significant number of countries reported that the technique of "smurfing" or structuring was commonly used - this technique entails making numerous deposits of small amounts below a reporting threshold, usually to a large number of accounts. The money is then transferred to another account, often in another country. This method was widely used, even in countries that did not have cash transaction reporting requirements, which require reports to be made to the authorities of transactions above certain thresholds. Countries to which these funds were transferred often found the funds being promptly removed as cash from the recipient accounts. In one country, it was found that increased awareness of this technique was causing smurfers to deposit sums of $2,000 to $3,000 into more accounts, so as to avoid detection. There continues to be many instances of the use of accounts held in the name of relatives, associates or other persons operating on behalf of the criminal. Other methods commonly used to hide the beneficial owner of the property include the use of shell companies, almost always incorporated in another jurisdiction, and lawyers. These techniques are often combined with many layers of transactions and the use of multiple accounts - thus making any attempts to follow the audit trail more difficult. The shell corporation is a tool which appears to be widely used in both the banking and non-banking sectors. Often purchased "off the shelf" from lawyers, accountants or secretarial companies, it remains a convenient vehicle to launder money. It conceals the identity of the beneficial owner of the funds, the company records are often more difficult for law enforcement to access because they are offshore or held by professionals who claim secrecy, and the professionals who run the company act on instructions remotely and anonymously. These companies are used at the placement stage to receive deposits of cash which are then often sent to another country, or at the integration stage to purchase real estate. Shell companies have also been the laundering vehicle for bankruptcy fraud. The FBI estimates that as much as 10% of bankruptcy filings involve fraud, including schemes such as the concealment of assets, petition mills, multiple filings, false statements, trustee fraud, attorney fraud, forged filings, embezzlement and credit card fraud. Another technique widely used, particularly by ethnic groups from Africa or Asia, is the "collection account." This payment method is used for legitimate purposes by foreign immigrants and laborers who send money to their home country. However, often the account receives payments from a number of apparently unconnected accounts in the source country. In some countries, organized crime infiltrates smaller banks and non-bank financial institutions, or even seeks to extend this control to a large range of businesses in that area. Experts from several member countries uncovered money laundering schemes involving complicit bank directors or employees, and in one member country a noticeable trend was the assistance provided by "private banking representatives" (bank employees who provide special services to wealthy customers) to "smurfs" who recycle the bank accounts used for structuring purposes. They typically begin using an account by making deposits and withdrawals heavily. Then a few months before the bank audits those accounts, they stop the activity and leave a few thousand dollars in the account. The account will then show up in the audit as an account that has not had a great deal of activity in the last three months, and is thus less suspicious. "Payable through accounts" are used by international money launderers. These are demand deposit accounts maintained at financial institutions by foreign banks or corporations. The foreign bank funnels all of the deposits and cheques of its customers (usually individuals or businesses located outside of the country) into one account that the foreign bank holds at the local bank. The foreign customers have signatory authority for the account as sub-account holders and can conduct normal international banking activities. The payable through accounts pose a challenge to "Know Your Customer" policies and Suspicious Activity Reporting guidelines. It appears that many banks offering these types of accounts have been unable to verify or provide any information on many of the customers using these accounts, which poses significant money laundering threats. Loan back arrangements are also a technique used in a number of countries, often in conjunction with cash smuggling. By this technique, the launderer usually transfers the illegal proceeds to another country, and then deposits the proceeds as a security or guarantee for a bank loan, which is then sent back to the original country. This method not only gives the laundered money the appearance of a genuine loan, but often provides tax advantages. In addition to the techniques outlined above, other familiar laundering techniques continue to figure prominently in the banking sector. Telegraphic transfers remain a primary tool at all stages of the laundering process because of the speed with which the money is transferred, thus making it difficult for law enforcement to trace illegal proceeds, particularly in several jurisdictions. Bank drafts, money orders and cashier's cheques also remain as common instruments used for laundering purposes. Large cash deposits are still being made in some areas, especially by persons and interests connected to the former Soviet Union and Eastern Europe. Often the cash deposit is quickly followed by a telegraphic transfer to another jurisdiction, thus lowering the risk of seizure. Finally, electronic funds transfer transactions pose a problem for funds originating in offshore jurisdictions, or are associated with "payment through accounts." One FATF member country had done a study which showed that lack of customer identification information on the telegraphic transfer message was a significant problem, and that up to 25% of messages from some jurisdictions did not have the ordering customer information that was needed. It was also noted that although sufficient information was received, the accuracy of some of the information recorded on the transfer message, particularly for funds that were transferred from the former Soviet Union and Eastern European countries, may be questionable....

The dramatic increase in the number of federally chartered credit unions that have chosen to switch to state charters has finally been moved up on the list of national CU priorities. Both CUNA and NAFCU have concluded that charter switching is a situation that needs to be addressed. Both groups are hard at work attempting to discover the reasons behind the accelerated charter switching. Both are also seeking to develop solutions less the much-prized dual chartering system becomes seriously weakened. In the last three years, the number of FCUs making the switch from federal to state charters totaled 146. In 1999, 32 feds converted to state charters. So far in 2000, the trend is continuing with three large California FCUs already dumping their federal charters in favor of a state charters. More large CU conversions will be announced soon. Just these three latest converts represent about $1.5 billion in lost federal assets. No wonder the most recent federal/state credit union statistics are so misleading. An immediate reaction to what's going on would be to lay the entire blame at the feet of NCUA. There are many who attribute the rash of conversions to NCUA's current leadership, especially its various policy interpretations and its setting of priorities. Many federal credit unions have made no secret of the fact that they are fed up with dealing with a regulator that has been described at various times by various people as dysfunctional, misguided, arbitrary, and out of touch. The inconsistencies from NCUA region to region, which are bound to worsen with the fallout from the current personnel scandal, is certainly a factor in blaming NCUA. Then there's the controversy surrounding NCUA and its reading of what Congress really intended when it passed H.R. 1151. Included in such discussions are the approval process for select employee groups and community charters. More recently there's the heated debate over the impact of prompt corrective action (PCA) and the definition of complex credit unions. Then there's NCUA's take on field of membership issues, low income designations, overlap protection, and exclusionary clauses. According to some recent converts, these are just some of the issues that they considered before deciding to convert. Looking at the increase in charter conversions from a completely different perspective, however, there are many in the fray who perceive the entire situation as not a problem, but an opportunity. The ultimate winners in a charter conversion, they say, are the members. Because credit unions have more choices than other financial institutions, the members stand to benefit. For example, if a federal credit union is located in a state with a law much more favorable than the federal law, converting seems like a logical choice, especially if the state law allows for better member service. While NCUA has been in turmoil, many state regulators have been busy improving their CU regulations, especially in regard to whom credit unions may serve. Taking it a step further, in a growing number of states, state charters don't even need federal insurance. By selecting private primary insurance as well as excess insurance they can completely disassociate themselves from federal oversight. (Need another CU difference regarding banks? Banks have no such opportunities.) Something else to think about: members don't really care if their credit union is federal or state chartered. They barely acknowledge any slight or major name change resulting from a charter conversion. What they do notice is good rates, good service, convenience, new products and services, etc. If a conversion is no big deal to members, but can result in a better credit union, why not convert? After all, it's no big deal to switch back again if the scales ever turn in favor of a federal charter, like after a change of NCUA leadership. There are other considerations. For example, if the drain continues, it could result in a smaller, less influential NCUA. That in turn could lead to serious consideration of folding NCUA into another regulator such as the FDIC. And there would be budget considerations, too. Fewer federal or federally insured credit unions paying for the operation of NCUA. NAFCU also has a couple of concerns. Fewer FCUs would mean fewer members and potential members for a national credit union trade group that has a much narrower niche than CUNA. NAFCU serves only FCUs while CUNA and its leagues are structured to serve any and all credit unions. An increase in charter conversions has already had a negative impact on NAFCU's once rising membership base. Some observers are asking if NAFCU will once again consider changing its membership criteria to include all federally insured CUs. Or even if current NAFCU leadership will consider abandoning the federal charter once they complete their service to that CU trade group. The broader question NAFCU raises is that if the federal presence is so weakened that credit unions are grouped by state law, wouldn't that make it easier for banking interests to attack credit unions one state at a time rather than fight a national battle? In upcoming months, watch for much more discussion regarding the charter conversion issue. Watch for a continued increase in the numbers of credit unions converting to state charters. Watch for more accusations from all the players on why the conversion process is escalating. Watch for individual states to do more than simply observe. And watch for a few credit union leaders, like NCUA Board Member Dennis Dollar, try and do something positive. His current Reg-Flex proposal is a prime example. Also keep an eye on the different approaches you'll see being taken by individual credit unions, CUNA, state leagues, NAFCU, NASCUS, and NCUA. In other words, watch for even more vested interests to surface. As the rhetoric heats up, let's hope that all the players keep in mind that credit union members must always come first in every credit union decision including whether or not to convert charters. Comments? Call 1-800-345-9936, Ext. 15, or Fax 561-683-8514, or E-mail mwelch@cutimes.com....

State Employees CU, Baltimore, Md., has named Karen Christian vice president of lending. Empire Corporate FCU, Albany, N.Y. has made the following appointments: Kevin A. Brauer, chief operating officer; Dirck C. Van Deusen, senior vice president, relationship management; and Charles W. White Jr., chief technology officer....

Fairwinds CU, Orlando, Fla., has announced that John Coffey and Richard Leigh have become directors on its Board. Gulf Coast Community FCU, Gulfport, Miss., has made the following appointments: Lisa Lindsey, vice president of sales & services; Dorothy Necaise, assistant vice president of lending services; Debbie Reno vice president of marketing; and Tina Spencer, assistant vice president of member services....

EDS CU, Plano, Texas, has made the following appointments: Shirley Cohen, senior vice president of lending; Phil Craver, senior vice president, CFO; Tom Condos, chief technology officer; Kevin Ericson, senior vice president of branch administration and member services; and Tim McCoy, vice president of marketing/business development. Security Service FCU, San Antonio, has elected the following officers to its Board: Chairman Bob Egger, 1st Vice Chairman Max Giovannini; 2nd Vice Chairman Joe Coleman; Treasurer Allen Snyder; and Secretary Larry McVay. In addition, SSFCU has named Danny Lane manager of the indirect lending department, and J.T. Cody vice president of legal services. The CU Commission, Austin, Texas, has promoted Cary Cabe, principal examiner in the Dallas zone, to the position of field manager in the Houston zone. University FCU, Austin, Texas, has named Sheila Jo Wojcik vice president of human resources....

Consumer Credit Counseling Service of the Florida Gulf Coast Inc. has made the following appointments: Edward Hamp of Tampa Bay FCU, chairman of the board; and L. Neil Timson of GTE FCU, director. NCR Systemedia Group, Dayton, Ohio, which provide "Relationship Technology" for retail, financial, telecommunications, airline and insurance markets, has made the following appointments: Mark D. Quinlan, vice president of sales for the Americas; and Michael J. VanDemark, vice president of global marketing. -lide@cutimes.com...

Defense CU Council, Fort Belvoir, Va., has named Jacqueline Connor, marketing director at Fort Belvoir FCU, the 1999 George E. Myers Scholarship recipient. Connor will use the scholarship to attend the Credit Union Executives Society's Executive Marketing Institute, which provides advanced curriculum on CU marketing issues. Connors, FBFCU marketing director since 1995, launched the FCU's Web site. The George E. Myers Scholarship began in 1996 in honor of former DCUC President George E. Myers. The Council, created in 1963, is comprised of 281 Department of Defense related CUs, with more than 10 million military and civilian members. Founders FCU, Lancaster, S.C., officials have announced that the FCU will donate $100,000 to Winthrop University for business scholarships. The scholarships will support a course that includes a 10-day summer trip during which recipients will be able to study the Federal Reserve and the Securities & Exchange Commission in Washington, as well as Wall Street brokerage houses and the stock exchange in New York. To thank Founders for the gift, university officials plan to name the Thurmond Hall multimedia room 308 the Founders FCU seminar room....

Central Florida Educators FCU, Orlando, has announced the relocation of its real estate lending offices. Assistant V.P. of Real Estate Lending Jeff Peters and other staff has moved from the FCU's main branch to the CFEFCU Member Service Center at 1823 N. Alafaya Trail. Double Eleven CU, Indianapolis, has awarded its $1.83 million contract for a new main office building to HBE Financial Facilities. NJDOT CU, Trenton, N.J., held a grand opening celebration for its new downtown office adjacent to the DMV building. Reynolds Carolina FCU, Winston-Salem, N.C., officials announced earlier this year that they would break ground on a new 85,000 square-foot administrative building in spring. The new three-story facility housing about 150 members and a branch office to serve members will be on 10 acres near the intersection of Hanes Mall Boulevard and S. Stratford Road. The facility is scheduled for completion in September of 2001. Safe 1 CU, Bakersfield, Calif., staff and members have celebrated the ground breaking for their new 16,000 square foot home office in Southwest Bakersfield at 1400 Mill Rock Way, near the Marketplace. Security Service FCU, San Antonio, among the top 20 largest credit unions in the nation, has broken ground for a new 128,000 square foot facility that will house all corporate offices in one building upon completion, which is scheduled for May 2001. SSFCU serves 385,000 members....

Wisconsin CU League, Pewaukee, will name a Political Activist of the Year at its May convention to highlight the importance of grassroots activities in pursuit of legislative goals. Eligible for the new award will be CU employees, volunteers, or a CU or group as a whole. Georgia Maxwell, WCUL director of government affairs, said that CUs have done a lot to reach out to legislators considering the CU Consumer Choice Bill, AB573/SB274, which passed the Senate in February. Nomination deadline for the new award is April 10. Sunmark FCU, Schenectady, N.Y., has named Shelli Polito their 1999 Employee of the Year. Shelli received a standing ovation after the award was announced during the FCU's 5th annual Employee Recognition & Service Awards Dinner. Nominees for this award are chosen on the basis of dedication to member service, job knowledge, loyalty to the FCU and team work, officials said. Travis CU, Fairfield, Calif., has been selected the winner of the "2000 Best Place to Bank in Solano County" by readers polled by the Fairfield Daily Republic. TCU has headquarters in Vacaville. It serves 113,000 members and has $803 million in assets....