LAS VEGAS — In the war on terror financing and anti-money laundering, just how big a “cop” role should credit unions be playing? If you hear it from NCUA Board Member Gigi Hyland, “playing cop” is simply not in the job description and never intended, but the industry does have a patriotic and a charter responsibility to assist law enforcement in tracking down crimes under the much maligned and burdensome Bank Secrecy Act/Patriot Act provisions. Acknowledging her frustration and hours spent “at home at my kitchen table” pouring over tracking transactions in her former job as senior legal counsel for Empire Corporate, she now realizes as a regulator the value “and noble good credit unions play as a pillar of prevention” in the war on terror financing. Still, “some of this is scary stuff” as CUs across the U.S. continue to grapple and fear a regulatory crackdown and huge fines for failure to comply, she told a two-day conference here sponsored by Credit Union Times and the Executive Enterprise Institute on “Complying with the Bank Secrecy Act and USA Patriot Act.”
While she said she understands compliance can often seem overwhelming, CUs can surmount the difficulties by enhancing dialog and communication with examiners “and not be shy” about coming forward to challenge opinions. The title of her speech was, “Taking the B.S. out of BSA.”
Not all the CEOs, compliance and audit staffers taking part in the Dec. 14-15 seminar at Caesar's Palace agreed with her about how much CUs are indeed “playing cop.” One panelist, Kenneth Long, vice president of compliance loss prevention at Army Aviation Center Federal Credit Union in Daleville, Ala., said “in reality” CUs are playing cop despite examiner protestations, but they are acting out of duty and necessity.
In her keynote speech, Hyland said her legal experience in dealing with BSA at Empire made BSA compliance a “passion” of hers, admitting also she “is a bit nerdy about the subject.” One of the major lessons she has learned over the years in both her old and new jobs is the importance of sharing data and experiences because “the guidance is out there.” In this way, CUs can avoid “getting slammed” as in the case of Riggs Bank of Washington, D.C., severely fined by regulatory agencies for anti-money laundering offenses for what turned out to be egregious failure to document suspicious activity reports–SARs. The NCUA Board member stressed the many demographic and geographic differences in BSA enforcement and risk assessment citing the conditions of a New York credit union that deals in frequent foreign transactions “because its major lending is for taxicab medallions” contrasted to a rural CU say in Iowa, which has no overseas transactions. But during a question and answer session, one CU executive noted that her institution has yet to file a SAR report, but was considering one now since a local watchmaker regularly wires funds to Swiss clients. And yes, to protect the CU it might be best for the CU to go ahead and document the transactions noting they are part of the “normal pattern of activity.”
Hyland stressed the need for CUs to engage in “constructive dialogue” with examiners to make sure they completely understand risk assessments or what she called the “changing dynamics” of membership fields.
In her remarks, Hyland commended CUs for the sacrifice and cost involved with BSA and recalled that BSA compliance “came screaming onto the scene with unparalleled vigor” after the 9/11 attacks.
“The lack of tangible guidance and detail on structuring or what constitutes 'suspicious activity;' the dearth of DORs related to BSA on credit union examinations and the enormous regulatory burden,” all contributed to confusion, she recalled.
In addition, “the uncertainty of where all these SARs were going and whether they were doing what they were supposed to do–help catch the bad guys–all contributed to my sense that there seemed to be quite a bit of 'B.S.' associated with BSA,” she told the conference.
Nonetheless, in addressing compliance best practices, the NCUA director encouraged CUs to understand that the burden is shared throughout all segments of financial services, emphasizing that a careful and periodic risk-based assessment is the backbone for an effective and cost efficient BSA compliance program.
She noted helpful guidance is available, including the Financial Crimes Enforcement Network Web site and the BSA/AML Examination Manual.
Hyland reminded the audience of the vital mission of protecting the reputation of the CU system by continuing to maintain safety and soundness throughout BSA compliance. In her remarks, she also cited the continuing dialogue within FinCEN's BSA Advisory Group and with the FFIEC. She reminded the audience of the upcoming August 1, 2007 deadline for mandatory compliance with the new SAR form, while emphasizing the importance for including all the information they have in the form. Hyland encouraged the use of helpful resources such as the SAR Activity Review, which summarizes the trends, tips and how law enforcement is using the information. Hyland assured the audience that NCUA is working diligently to improve the system and noted the agency's participation on the BSA Advisory Group in order to share best practices and work to improve the system, including the effort to respond to the recent GAO study of federal financial regulators enforcement efforts. –[email protected]
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