BSA AML Requirements Need Flexibility for Credit Unions: Trades

The federal government’s Bank Secrecy Act and Anti-Money Laundering rules must be updated to recognize the huge burden requirements have on small institutions, such as credit unions, the industry’s trade groups said this week.

“Credit unions take BSA/AML compliance seriously and dedicate significant resources to it,” CUNA President/CEO Jim Nussle wrote in a letter to leaders of the Senate Banking Committee. “However, when credit unions are spending their limited resources disproportionately on compliance, this means they are spending fewer resources on innovating and providing safe and affordable products and services.”

“Credit unions are not looking for the NCUA to design a prescriptive training program that must be followed, but rather support flexibility in carrying out this important function to ensure that necessary and vital reporting continues and credit union staff may be protected from civil liability,” Brad Thaler, NAFCU’s vice president of legislative affairs wrote in a letter to the Banking Committee.

The Banking Committee on Thursday held a hearing on how to update the laws to take into account such developments as emerging technology.

“While not yet settled on any one particular reform or fix, members of the Committee are united on the idea that there is room for change in a decades-old system that will yield a modernized BSA anti-money laundering regime that works for law enforcement, financial institutions, their regulators, and the man in the street, who is the ultimate beneficiary of a strong U.S. financial system,” committee Chairman Mike Crapo (R-Id.) said.

While acknowledging that changes are needed, committee ranking Democrat Sherrod Brown of Ohio warned that loosening the rules for small institutions might hurt federal law enforcement efforts.

“Money launderers are looking for the weakest link, whether it is HSBC or BB&T or Lone Star National Bank and will migrate to smaller banks as necessary to hide their crimes,” Brown said.  “Community and regional banks play a crucial role alongside our biggest banks in monitoring transactions across the country.”

However Nussle said that regulatory agencies should not punish financial institutions for unintentional violations.

He also called on Congress to minimize the duplication of the same or similar information, provide additional flexibility based on the reporting institution type or level of transactions, increase the threshold requiring Currency Transaction Reports and allow for regulatory and examination consistency among regulators such as the NCUA and state credit union regulators.

However, Kenneth Blanco, director of the Treasury Department’s Financial Crimes Enforcement Network, said that even without any changes, the AML/BSA requirements are working.

“If the system were not working, bad actors would not be working so hard to come up with new and creative ways to move their ill-gotten gains in and around the financial system,” he said.

And he warned that policymakers must be careful when making any changes to the financial corruption laws.

“While we are eager to improve and reform the BSA framework, we believe it is important to ensure that any change is supported by such an assessment and a clearer understanding of how to measure the effectiveness of BSA data,” he said.