Despite Experience, BSA Remains a Key Compliance Issue for Credit Unions

ALEXANDRIA, Va. — Even though credit unions have had a couple of years to get used to more stringent Bank Secrecy Act enforcement, NCUA still highlighted it as the top compliance problem for credit unions. CU Times: What are some of the biggest and/or most consistent compliance problems NCUA sees from CUs? NCUA: Compliance with the Bank Secrecy Act is a challenge for credit unions. Some of the BSA-related issues credit unions seem to struggle with deal with providing/documenting training for staff and ensuring independent testing is performed by individuals not directly involved in the BSA compliance program. While not a requirement of the BSA, some credit unions have not performed a written risk assessment, which forms the basis for an effective BSA compliance program, particularly relating to a system of internal controls to minimize the risk of money laundering and/or terrorist financing. Additionally, new or modified BSA requirements over the last few years have forced credit unions to focus a lot of their attention on this critical issue. It’s important that credit unions not lose sight of other consumer compliance issues, such as Member Privacy, HMDA, and Flood Disaster Protection requirements. CU Times: Why? NCUA: Using the BSA as an example, we have written risk-based rules to ensure compliance within the credit union community. Credit unions need to balance developing a risk-based compliance program with a mandate of strict compliance with the BSA. While this can be a difficult task, credit unions should find some comfort in knowing that steps taken to comply with BSA requirements, as well as other mitigating circumstances, can factor into any instance of noncompliance. NCUA understands that not all risks can be eliminated entirely without adversely impacting operations at the credit union. Therefore, any instance of noncompliance will be weighed against the program in place to mitigate risk. CU Times: Does a credit union’s size appear to be a factor? NCUA: Size can be a factor for compliance issues in that larger credit unions may have more resources available to utilize outside specialists to assist them in their consumer compliance programs. They also, however, typically deal with much more complex products and services though. Smaller credit unions are encouraged to look for external resources via credit union leagues or mentor programs with larger credit unions in their area. CU Times: What are the repercussions, tangible and not? NCUA: Many consumer compliance violations, including BSA, can lead to fines and penalties if not corrected timely by credit union management. Regardless of the financial impact, credit unions are exposed to additional reputation risk associated with noncompliance. CU Times: How do you recommend avoiding and/or fixing some of these problems? NCUA: Credit unions need to be aware of the requirements of each particular consumer compliance regulation. Specifically relating to the BSA, credit unions can tailor their compliance program based on their own unique risks and complexity of products and services. With the guidance of a written risk assessment, credit unions are permitted to focus attention on areas of higher risk, which may make the program much more efficient. Credit unions are encouraged to continue fostering communication with examiners to educate them on the steps taken to mitigate compliance risk. –[email protected]