The Panama Papers ensnared foreign heads of state and financialinstitutions, but they’re also likely to have a ripple effect inthe U.S., with enforcement agencies sharpening their focus onanti-money laundering and Bank Secrecy Act reviews.

That may cause some sleepless nights for credit unionexecutives, who already are feeling the weight of AML and BSAcompliance, experts said.

“Typically, credit unions have a low risk profile,” RobertPargac, a director for Navigant's Global Investigations andCompliance practice, said. Navigant is a Chicago-based consultingfirm.

However, that could make small, low profile credit unions evenmore attractive to financial criminals, Lawrence Reaves, presidentof the Kernersville, N.C.-based consulting firm Advanced FraudSolutions, said.

“The bad guys are looking for the weakest link,” he said. “Theystart to go downstream and look at the smaller institutions.”

Cindy Williams, vice president of regulatory compliance forPolicyWorks, a Des Moines, Iowa-based compliance consulting firm,added, “Small credit unions used to feel safe. However, it hasbecome well known over the last several years that small creditunions are specific targets for fraud and suspicious activitysimply because their monitoring systems may be less sophisticatedthan larger financial institutions.”

And as the Panama Papers demonstrated, the bad guys want to hidetheir assets.

“I’ll be shocked if the regulators aren't looking at the PanamaPapers,” Alex Henderson, co-founder and general manager ofcompliance services for Teraverde Management Advisors, said.Teraverde is a financial consulting firm located in Lancaster,Pa.

Members of Congress certainly are looking at the Panama Papers.Sens. Elizabeth Warren (D-Mass.) and Sherrod Brown (D-Ohio)recently sent a letter to Treasury Secretary Jack Lew askingwhether any U.S. entities were involved with Mossack Fonseca &Co., the Panama-based law firm whose leaked records pointed toefforts to help clients create shell companies to launder money,hide assets and evade taxes.

In light of the recent terrorist attacks in Europe, the PanamaPapers placed governments around the world on even higher alert forsuspicious activities – including financial ones.

Credit unions were already in the firing line. Last year,The Wall Street Journal reported the Financial CrimesEnforcement Network was investigating 50 credit unions that mightbe particularly vulnerable to money laundering.

NCUA Chairman Debbie Matz later said FinCEN had agreed to sharedraft reports on credit unions with the NCUA to ensure theiraccuracy.

The Panama Papers scandal may energize FinCEN's efforts to issuefinal rules strengthening customer and member due diligencerequirements, according to Henderson. Those rules would requirefinancial institutions to verify the identities of beneficialowners of their customers and members. The proposed rules wereissued in 2014.

“My prediction is that the impact of the Panama Papers will beto move that along faster,” Henderson said.

That will be a welcomed development, Pargac said.

“It needs to happen sooner rather than later,” he said. “Maybethe Panama Papers … is going to be what pushes it to the top.”

The length of timethe proposed rules have been circulating without the adoption of afinal rule is bothersome, Pargac said, adding that it could causecredit unions to change their compliance systems in the middle ofthe year.

“It creates uncertainty in the process that really isn'tneeded,” he said.

Henderson said he believes FinCEN also is examining the issue ofpersonal liability for compliance officers.

“That's a tough nut to crack,” Pargac said. “A lot of the timecompliance people are really trying to do their jobs.”

However, he cited the case of Thomas Haider, a former complianceofficer for money transfer company MoneyGram, as evidence thatfederal officials will not shy away from the personal liabilityissue. MoneyGram reached a $100 million settlement with the federalgovernment in 2012 after the company was accused of wire fraud andmoney laundering control violations.

The Treasury Department then fined Haider $1 million, and inJanuary, a federal judge in Minnesota ruled compliance officers maybe held accountable under money laundering statutes.

Pargac said the federal court ruling will lead to additionalcases in which compliance officers will be held liable if they donot develop effective AML and BSA programs.

“We will see more of that in the future, but it will have to beegregious,” he said.

Still, those interested in money laundering and other financialcrimes usually manage to stay one step ahead of the technology usedto catch them, according to Williams.

“As is often the case in our industry, the ability to executethese types of transactions is growing faster than the systemsneeded to monitor them,” she said. “Credit unions will need to becontinually exploring ways to stay on top of thesetransactions.”

Some methods usedby money launderers and other financial criminals are quite simple,she said. Recently, fraudsters used publicly available informationabout credit union executives, including information from theirsocial media accounts, to initiate transactions that appeared to beat their own request.

Williams said a couple of years ago, she attended a BSAconference at which one speaker said a few criminals were likelyattending the meeting simply to learn what was being discussed.

“The fraudsters are always coming up with new methods to laundermoney,” Williams said. “And they stay on top of industry efforts tothwart those activities.”

More recently, FinCEN used Geographic Targeting Orders torequire U.S. title insurance companies to identify the peoplebehind all cash purchases of real estate in New York City andFlorida's Dade County, FinCEN Director Jennifer Shaskey Calverysaid in an April 12 speech.

Pargac said for a compliance program to be effective, it must bedriven from the top.

“It has to start with the board of directors and the CEO,” hesaid, adding that credit unions must adopt anti-money launderingefforts as part of their business strategy.

“You have to weave it into the fabric of the institution,” hesaid.

Pargac added some credit unions underestimate the importance ofan effective program.

“You don't understand how important it is until you’re caught,”he said.

However, Reaves added every staff member, including tellers,must be involved in spotting questionable transactions. He said hiscompany has developed a product that scans checks for severalrisks.

“We boil it down to a red light-green light for the teller,” hesaid.

Pargac said Navigant offers a variety of programs that evaluatethe effectiveness of a financial institution's compliance efforts.For instance, the company will examine a credit union'stransactions over the past year to identify problems. Navigant canalso conduct a gap analysis to identify holes in a credit union'scompliance program.

The inevitableresult of increased scrutiny is increased compliance costs,according to Marvin Umholtz, president/CEO of Umholtz StrategicPlanning & Consulting Services in Olympia, Wash.

“It's really going to squeeze the smaller institutions,” Umholtzsaid, adding that regulators are moving from a risk-based regime toone that emphasizes compliance. He noted their attitude seems tobe, “We’re going to treat you like we treat the big guys.”

“That's why a lot of the folks involved in the smaller creditunions are really sweating it,” he said.