BSA – Customer (Member) Due Diligence

The cornerstone of a strong BSA/AML compliance program is the adoption and implementation of comprehensive CDD policies, procedures, and processes for all members, particularly those that present a high risk for money laundering and terrorist financing.

The objective of CDD should be to enable the credit union to predict with relative certainty the types of transactions in which a member is likely to engage. These processes assist the credit union in determining when transactions are potentially suspicious.

The concept of CDD begins with verifying the member’s identity and assessing the risks associated with that member. Processes should also include enhanced CDD for high-risk members and ongoing due diligence of the member base.

Effective CDD policies, procedures, and processes provide the critical framework that enables the credit union to comply with regulatory requirements and to report suspicious activity.
An illustration of this concept is provided in Appendix K (“Customer Risk Versus Due Diligence and Suspicious Activity Monitoring”).

CDD policies, procedures, and processes are critical to the credit union because they aid in:

  • Detecting and reporting unusual or suspicious transactions that potentially expose the credit union to financial loss, increased expenses, or reputational risk.
  • Avoiding criminal exposure from persons who use or attempt to use the credit union’s products and services for illicit purposes.
  • Adhering to safe and sound credit union practices.

In some cases, a credit union member might pose a higher risk because of the member’s business activity, ownership structure, anticipated or actual volume and types of transactions, including those transactions involving higher-risk jurisdictions. In these cases, and enhanced due diligence (EDD) should be used. These members warrant additional scrutiny, and credit unions should consider obtaining some of the following information:

  • Purpose of the account
  • Source of funds and wealth
  • Individuals with ownership or control over the account, such as beneficial owners, signatories, or guarantors
  • Occupation or type of business (of member or other individuals with ownership or control over the account)
  • Financial statements
  • Banking references
  • Place where business is organized
  • Proximity of the member’s residence, place of employment, or place of business to the credit union
  • Description of the member’s primary trade area and whether international transactions are expected to be routine
  • Description of the business operations, the anticipated volume of currency and total sales, and a list of major customers and suppliers
  • Explanations for changes in account activity

For additional information, click here for the topic.

Review the information today to help your credit union remain in compliance.


NCUA Launches Small Business Lending Resource Center

Credit unions have a new online destination for information about member business lending thanks to a webpage released today by the National Credit Union Administration.

Available here, the Small Business Lending Resource page provides detailed information about NCUA’s member business lending rules and regulations, supervisory guidance, links to the Small Business Administration’s loan programs and related articles from The NCUA Report, NCUA’s flagship publication.

“Credit unions do an excellent job of meeting the credit needs of their communities, including many small businesses,” NCUA Board Chairman Debbie Matz said. “This new online portal provides valuable information on how credit unions can prudently lend to their small business members and tap into SBA’s lending programs. I encourage all credit unions to explore this resource and to participate in our upcoming joint webinar with the SBA.”

On Feb. 6, NCUA and the SBA signed a Memorandum of Understanding outlining a series of educational initiatives during the next three years that include webinars, examiner training on SBA programs, data resources and media outreach.

This new partnership kicks off with a joint webinar, “Balancing Member Business Loan Portfolios with SBA Guarantees,” on March 4, 2015, at 2 p.m. Eastern. Interested credit unions can register online at

Source: NCUA

CUNA Seeks Real Life Regulatory Burden Examples for Senate Banking Committee
CUNA launched a new tool last week to help credit unions collect real life examples of how growing regulatory burden results in reduced service for members and/or increased costs to credit unions—a request made last week by the Senate Banking Committee. At a recent Senate Banking Committee hearing, at which CUNA testified, Sen. Richard Shelby (R AL) asked credit unions and community banks to submit concrete examples of how regulations negatively affect service to consumers. Several other senators echoed the Senate Banking Committee chair's request for more information. CUNA believes that the committee's interest in learning more about the regulatory environment signals a serious and welcomed attempt to roll back some of the tide of regulatory and compliance burden that credit unions have been subjected to over the past decade. It is vital that the Senate receives real examples of the negative consequences of unnecessary regulation, and CUNA requests that credit unions use the form to provide examples of how regulatory burden has caused the credit union to: not offer a new service, terminate an existing service, offer a service to fewer members, offer a service at a less attractive price, or generally offer a service in a less beneficial way to members because of a rule or regulation. CUNA will forward all examples to the Senate Banking Committee. Although the form asks credit unions to identify themselves so CUNA can follow up if necessary, a credit union may choose to not be identified in the information provided to the Senate. Please send questions to

CUNA initiates 'deep dive' into true costs of CU compliance
CUNA will soon launch a comprehensive study and fact-based analysis of the actual compliance costs credit unions face due to regulatory burden. Wally Murray, president/CEO, Greater Nevada CU, Carson City, Nev., announced the initiative in his testimony before the Senate Banking Committee in a Thursday hearing on regulatory relief.

The assessment is intended to be used as an informational resource for policymakers about the full cost of regulatory requirements. Having dollar figure for compliance costs will allow CUNA to advance regulatory relief in the legislative and regulatory arenas.

Sen. David Vitter (R LA) asked witnesses at the Tuesday hearing for specifics when it came to compliance costs, and bank regulators said they could only provide anecdotal information.

Members of the Senate Banking Committee also asked about compliance costs in a regulatory relief hearing Thursday, at which CUNA testified.

CUNA has engaged Cornerstone Advisors, Inc. to review operational, strategic, financial and member impacts of regulations that have come in the post Dodd-Frank Act era.

Cornerstone's efforts will be conducted in two phases. The first will see it perform in-depth analyses of three credit unions of different sizes to see how regulations and regulatory compliance affect operations and costs.

The second phase involves Cornerstone using the information gleaned during the first phase to create a survey that all credit unions can complete, which will gather information about compliance and other regulatory costs facing credit unions today.

The overall process is expected to take from six to eight months.

Source: CUNA

NCUA issues joint agency guidance promoting youth savings programs

WASHINGTON (2/25/15)--The National Credit Union Administration, along with the other four federal financial regulators, issued guidance Tuesday designed to encourage all financial institutions to offer youth savings programs.

The guidance contains answers to frequently asked questions regarding young consumers' accounts, as well as compliance information for opening such accounts.

Research from the U.S. Treasury indicates that youth savings programs may be effective in helping improve long-term financial and educational outcomes, such as completing college.

Youth savings programs are often structured as in-school credit union programs offering student basic savings accounts. They may also include more complex, asset-building accounts and school district-wide programs. (See related story: Nat'l CU Foundation, CU CEO present youth savings info to FLEC today.)

These programs are generally linked to personal financial management efforts, and include very low minimum balance requirements on accounts.

The guidance does not create any new regulatory policy or establish new industry expectations. In addition to the NCUA, the guidance also was sent out by the Office of the Comptroller of the Currency, the Federal Reserve Board, and the Federal Deposit Insurance Corp.

Source: NCUA

New FinCEN website meant to assist FBAR filers

WASHINGTON (2/24/15)--Individuals and institutions that are required to file a Report of Foreign Bank Account (FBAR) have a new resource available on the U.S. Treasury's Financial Crimes Enforcement Network (FinCEN) website.

FBAR forms are filed annually and are used to report a financial interest in, or signature or other authority over, bank accounts, securities, or other types of financial accounts in foreign countries. FBARs must be filed for accounts that hold over $10,000 in funds at any time during the year.

According to FinCEN, an FBAR filer is considered an individual when he/she personally owns, or jointly owns with a spouse, a reportable foreign financial account that requires the filing of an FBAR for the reportable year.

Individuals may electronically file their FBAR through the BSA E-Filing System without registering for a BSA E-Filing account.

Attorneys and certified public accountants filing FBARs on behalf of clients must register to become an e-filer, and file as an institution rather than an individual. FinCEN's new website contains information on that as well.

FBARs must be filed by June 30, and no extensions are available.

Source: CUNA

NCUA webinar highlights fair lending examination procedures

ALEXANDRIA, Va. (2/23/15)--A webinar hosted by National Credit Union Administration staff Friday gave credit unions a look at how the agency conducts fair lending examinations.

It is illegal for lenders to discriminate based on race, color, national original, religion, sex, handicap or familial status, and the webinar provided a look at how the NCUA enforces related rules and regulations.

The NCUA supervises and examines federal credit unions with assets of $10 billion or less for compliance with fair lending laws. The Consumer Financial Protection Bureau supervises and examines those with $10 billion or more in assets for fair lending compliance.

Matt Biliouris, deputy director of the NCUA's Office of Consumer Protection, said the agency plans to conduct 25 fair lending exams and 50 offsite supervision contacts in 2015.

"Our fair lending exams are an extensive review of a credit union's compliance with fair lending laws. We follow the interagency fair lending examination procedures, which may include extensive transaction testing," he said. "Under our offsite supervision contacts, we review a credit union's compliance management system elements, without any transactional testing."

According to the NCUA, it selects federal credit unions for a fair lending exam or off-site supervision contact if they demonstrate: Home Mortgage Disclosure Act data outliers, member complaints, prior regulatory violations, general compliance risks, whistleblower complaints or receive recommendations from field examiners.

Prohibited practices include:

  • Requiring a spouse to co-sign on a loan when the borrower qualifies for the loan on their own creditworthiness;
  • Requiring a co-signer to be a spouse for a loan where an additional party is necessary to support the credit requested;
  • Evaluating credit score used for joint applicants differently based on whether or not the applicants are married; and
  • Favoring persons who are not "elderly," meaning 62 or older, under the Equal Credit Opportunity Act.

According to the NCUA, having an effective compliance management system consisting of board and management oversight; policies and procedures; staff training; monitoring, testing and corrective action; compliance audits; and member complaint response procedures are the best way to ensure fair lending compliance.

The webinar will be posted to the NCUA's website in the next two weeks.

Source: CUNA


77 Percent of Credit Unions Could Get Special Regulatory Consideration

The NCUA Board approved a proposed rule (Part 791) and policy statement to update the definition of a “small entity” under the Regulatory Flexibility Act to include federally insured credit unions with assets of up to $100 million.

“Small credit unions are essential to their communities, but many are struggling,” NCUA Board Chairman Debbie Matz said. “Few economies of scale, tight interest margins, outdated technology and new competitors are among the market forces our Office of Small Credit Union Initiatives works to help them overcome. To further help small credit unions compete, the NCUA Board has already taken several steps to alleviate regulatory burdens, including scaling our rules for interest rate risk, liquidity and risk-based capital and revising our examination process.

“We can, however, do more,” Matz said. “This proposal begins a process to provide more regulatory relief for more credit unions so that they can focus on serving their members, not on complying with regulations designed for larger credit unions that pose greater risk to the Share Insurance Fund.”

Under the proposal, 745 more credit unions would receive special consideration for reduced regulatory compliance requirements or exemptions in future NCUA rulemakings. The higher asset threshold commits the Board to specifically review the economic impact on small credit unions during future rulemakings. The Regulatory Flexibility Act generally requires federal agencies to determine and consider the effect of proposed and final rules on small entities.

Under the proposed definition for a “small entity,” approximately 4,869 federally insured credit unions would receive special consideration for regulatory relief. In all, the proposal would cover 77 percent of federally insured credit unions with 11 percent of the system’s assets.

In proposing the $100 million asset ceiling, the NCUA Board analyzed a broad range of metrics, including: deposit, asset and membership growth rates; the ratio of operating costs to assets; merger and liquidation trends; and operating expenses. In addition to providing potential regulatory relief, the proposal would make more federally insured credit unions eligible for assistance from NCUA’s Office of Small Credit Union Initiatives, at no cost.

Comments on the proposed rule, available online here, must be received within 60 days of publication in the Federal Register.

CUNA Still Accepting Input on CFPB’s Prepaid Accounts Proposal

CUNA continues to review the prepaid accounts proposal, which would apply to prepaid accounts (including general¬ purpose reloadable cards as well as other types of prepaid accounts such as digital wallets) that are offered to consumers. Specifically, the proposed rule would extend to prepaid accounts, many consumer protections under Regulation E, as well as protections under Regulation Z for prepaid accounts that offer credit options. While only a limited number of credit unions offer prepaid cards directly as issuers, we have several concerns about the impact of the proposal on these financial products now and into the future, such as treating overdraft coverage on prepaid cards as loans. Even though we are not aware of any credit unions that currently offer prepaid accounts with overdraft features, we are quite concerned with the potential broader implications this rule could have on overdraft regulation generally. The CFPB has indicated that it does not intend to address overdraft regulation in the same way that it is proposing in regard to overdraft of prepaid accounts. However, CUNA continues to press the CFPB to deal with any regulation of overdraft in a focused manner that does not directly or indirectly curb credit unions ability to provide a very important service to their members. CUNA is working with credit unions, leagues, and other financial trade associations to ensure its comments

April 27 is RBC2 comment deadline

The comment deadline is April 27 for the revised risk-based capital plan proposed Jan. 15 by the National Credit Union Administration.

As expected, the proposal was printed in today's issue of the Federal Register, thereby kicking off the 90-day comment period set by the agency.

The Credit Union National Association has noted "significant improvements" in the agency's revised plan and is seeking credit union comment on how the new proposal will affect their operations, and what further improvements are necessary. CUNA soon will issue a Comment Call for credit union views.

See related story for more details: RBC2 changes, improvements, outlook detailed in CUNA webinar.

For more information, check's CUNA's Risk-Based Capital Action Center, Risk-Based Capital blog and future issues of News Now.

Source: CUNA

Regulatory Advocacy Report

The CUNA Regulatory Advocacy Report keeps you on top of the most important changes in Washington for credit unions--and what CUNA is doing to monitor, analyze, and influence government agencies and federal law. You can view the current report and past reports from the archive.

Compliance eNEWSLETTER

February 27, 2015
Vol. 9, Issue 8

Created in partnership with the

Credit Union National Association

CU Compliance Connection – One per Year IRA   Rollover

Recent court action has changed how members will have to manage their individual retirement accounts and limits rollovers to one per year. For information on how this will impact your members and credit union join this presentation.

Click here for the video

March, 2015 April, 2015 May, 2015
  • May 25th, 2015: Memorial Day - Federal Holiday
July, 2015 August, 2015


CUNA offers hundreds of online training events that make it easy for you to learn right at your desk. Whether you are looking for a beginner course or want a comprehensive understanding on a specific topic, CUNA webinars, audio conferences and eSchools have what you need. Click here for updates on compliance, operations, lending topics and more!

Collection Compliance Do’s and Don’ts for the Frontline webinar 3/4/2015

Recognizing Financial Elder Abuse for the Frontline webinar 3/11/2015

New Accounts for the Frontline – Compliance Issues to Watch For webinar 4/1/2015

CUNA Regulatory Compliance School (Spring Las Vegas) 4/12/2015

Cyber Crime - No Gun Needed, Detecting and Preventing a Corporate Account Takeover webinar (5/13/2015

CUNA Consumer Lending eSchool (2015) 6/1/2015

The Basics of Consumer Lending – Part 1 webinar 6/1/2015

Home Equity Lending webinar (2015) 6/4/2015

The Basics of Consumer Lending – Part 2 webinar 6/8/2015

Consumer Lending Compliance 101 webinar 6/11/2015

Top 100 Trends in New and Used Car Lending - Plus Unsecured Lending webinar 6/15/2015

Advanced Exceptions with International ACH Transactions (IAT) - OFAC Compliance webinar 6/17/2015

Financial Counseling - What to Look for and What to Know as a Lender webinar 6/18/2015