On Wednesday, the NCUA reported the $2.25 million Internet Archive FCU of New Brunswick, N.J., paid all insured member shares as part of its voluntary liquidation.
In a release, the NCUA said it initiated cease-and-desist order proceedings on Nov. 24, 2015, in order to prevent the credit union from committing unsafe and unsound practices and violations of law, rule and regulation.
Brewster Kahle, a former technology pioneer who founded the credit union, disputed the NCUA's charges. In a Dec. 18 CU Times story, he shared his grievances, which included the NCUA restricting the credit union's loan portfolio to $37,000 when it had $1 million in reserve for bad loans, revoking the membership of migrant farm workers and sending examiners and "special examiners" to the credit union's office every month for two years.
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However, Internet Archive members voted to voluntarily liquidate the cooperative on Dec. 8.
NCUA regulations required the credit union to then provide the NCUA with a voluntary liquidation plan, which the NCUA approved Jan. 6. At that time, cease-and-desist proceedings were abated in anticipation of the credit union's share distribution to members.
The temporary cease-and-desist order identified the credit union's failure to correct ongoing deficiencies since it was chartered, including:
- Unwillingness to open accounts within the field of membership, make loans, and establish operations in the low-income community where the credit union was chartered to serve;
- Violations of the Bank Secrecy Act and USA PATRIOT Act; and
- Weakening financial conditions and mounting losses.
The temporary cease and desist order required the credit union take certain actions, including:
- Develop and implement a marketing plan targeting the field of membership the credit union was chartered to serve: New Brunswick and Highland Park, N.J.;
- Provide annual, BSA training for all staff and officials;
- Engage a qualified, independent third party to conduct BSA compliance program testing and report the results of that testing to the credit union's board of directors;
- Develop a system of internal controls to ensure ongoing compliance with laws and regulations related to the BSA, anti-money laundering and Office of Foreign Assets Control regulations;
- Develop and implement an adequate customer identification program to verify the identity of any person applying for membership;
- Cease all online account opening activity until a customer identification program had been developed in accordance with federal law, approved by the NCUA's Region II Director and implemented;
- Ensure that lists of subjects and businesses periodically published by the Financial Crimes Enforcement Network were cross-checked against the credit union's membership records; and
- Develop and implement a written strategic business plan and budget directed at reversing the ongoing deterioration of net worth and earnings in order to avoid Prompt Corrective Action.
Chartered in 2012, Internet Archive served 391 members.
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