A leaked report from the Treasury Department's Financial CrimesEnforcement Network was the topic of a high-profile report on Tuesday by The Wall StreetJournal, which said the agency is scrutinizing more than50 credit unions that may be particularly vulnerable to potentialmoney laundering.

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The confidential FinCEN report did not accuse any credit unionsof wrongdoing, according to the Journal, but it didhighlight increasing relationships with check-cashing companies andother firms FinCEN calls money-services businesses. Criminal groupsand drug trafficking organizations could be targeting credit unionsvia MSBs to gain access to the formal financial system, itreported.

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Actors Federal Credit Union, which is headquartered in New YorkCity, was cited in the article as one of the credit unions onFinCEN's list. Actors FCU has $209 million in assets and about25,000 members. Bethex Federal Credit Union, which is headquarteredin the Bronx, was also cited. Bethex has $15.6 million in assetsand about 4,900 members. Neither were accused of wrongdoing.

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Does the Wall Street Journal's articleon the Treasury's scrutiny of credit union management of BankSecurity Act risk harm the industry's reputation risk?

Yes No What Wall StreetJournal article? OtherPlease Specify:

PollMaker

 

 

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“Financial services today are filled with complex challenges towhich credit unions are not immune, and NAFCU supports sensibleregulation and exams that are tailored to actual risks,” NAFCUSenior Vice President of Government Affairs and General CounselCarrie Hunt said. “The NCUA, jointly with FinCEN and otherfinancial regulators, has issued clear guidance relative tomoney-service businesses to identify and address potentialrisks.”

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Hunt added, “I will note that NAFCU has expressed concern andquestions to FinCEN as to circumstances of the release ofconfidential information – even though, based on the article, itdoes not appear that any credit union is accused of wrongdoing oran activity that would require regulatory action. NAFCU opposes anyregulation that unnecessarily impedes credit union operations.”

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According to FinCEN, which is part of the Treasury Department,people or businesses doing at least $1,000 per person per day worthof currency exchange, or dealing, check cashing or issuing orredeeming travelers' checks or money orders, must register with theU.S. Treasury as MSBs. Money transmitters of all sizes mustregister as well.

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This is not the first time FinCEN has looked into moneylaundering at credit unions. In November, the Treasury Departmentfined the now-closed North Dade Community Development FCU $300,000for failing to adequately monitor, detect and report suspicioustransactions by 56 money-services businesses that were members ofthe credit union. Those MSBs were in what FinCEN called “high-riskjurisdictions far outside its field of membership.” In that case,90% of the credit union's annual revenue in 2013 was from thoseaccounts, FinCEN said. The credit union had $4 million in assetsand five employees but did $1.01 billion in outgoing wires for MSBsin 2013, as well as $984 million in remotely captured deposits,FinCENsaid.

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Also in November, FinCENissued a statement addressing what it said were concerns thatbanks were indiscriminately terminating the accounts of all MSBs orrefusing to open accounts for any MSBs, thereby eliminating them asa category of customers.

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“Such a wholesale approach runs counter to the expectation thatfinancialinstitutions can and should assess the risks of customers on acase-by-case basis,” it said. “Similarly, a blanket directionby U.S. banks to their foreign correspondents not to process fundtransfers of any foreign MSBs, simply because they are MSBs, alsoruns counter to the risk-based approach. Refusing financialservices to an entire segment of the industry can lead to anoverall reduction in financial sector transparency that is criticalto making the sector resistant to the efforts of illicit actors.This is particularly important with MSB remittance operations.”

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“FinCEN does not support the wholesale termination of MSBaccounts without regard to the risks presented or the bank'sability to manage the risk,” it also said in the statement. “Asnoted, MSBs present varying degrees of risk, and not all moneyservices businesses are high-risk.”

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FinCEN has not said whether it is investigating the leak toThe Wall Street Journal.

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“I can't comment on any specific investigation, but I canconfirm that we take the security of BSA information very seriouslyand there are criminal penalties for unauthorized disclosure of BSAinformation,” a FinCEN spokesperson told CU Times. “Whendisclosures occur, we refer those cases to the appropriate lawenforcement agencies for potential criminal investigation.”