DCU Issues Interpretive Letter Regarding Agreements to Transfer Deposits from One Credit Union to Another

Interpretation applies to all Washington state-chartered credit unions.

5/8/18

Picture of money jarThe Washington State Department of Financial Institutions Division of Credit Unions (DCU) recently issued Interpretive Letter I-18-01 which reviews the ability for a Washington state-chartered credit union entering into an agreement to transfer the member deposits to another Washington state-chartered credit union.

The analysis in the Interpretive letter addresses the question:

Credit Union A is a Washington state-chartered credit union and wants to close a branch, transfer the branch deposits to a local credit union so the members will continue to have local services, and retain the branch loans. Credit Union B is a Washington state-chartered credit union in the same local community as the branch. Both credit unions have a field of membership that includes persons in the local community.

In answer to the question, the DCU concluded:

Credit Union A, a Washington federally insured credit union, may, for consideration, assign and transfer all right, title, and interest it may have in certain deposits it has, pursuant to RCW 31.12.402(6). Credit Union B, also a Washington federally insured credit union, may assume the liability to credit union members for its assumption of such deposits, pursuant to 12 CFR §741.8(b)(3). Unless Credit Union B has low-income designation, it may only accept member deposits, so Credit Union B will need to verify that the transferred deposits are from persons who qualify as a member of Credit Union B and determine their application requirements. Credit Union B is required to conduct its own customer due diligence in compliance with the Bank Secrecy Act. As a best practice, Credit Union B should identify any members from the transferred deposits that would, as a result, exceed federal deposit insurance limits and allow such members to withdraw transferred funds without penalty for a short period of time before or after Credit Union B accepts the transferred deposits.

This interpretation applies to all Washington state-chartered credit unions, similarly situated. However, to the extent credit unions other than Credit Union A or Credit Union B present factual circumstances that are different than as above-described, the Division of Credit Unions’ interpretation may be different.

Question of the Week

If a member gives their debit card and pin number to another person to do occasional purchases for them and subsequently this person withdrawals cash for themselves, is the member liable for the total amount of the withdrawals or would the credit union have to refund the funds to the member?

The credit union may hold the member liable. The transaction would not be considered “unauthorized” if the member gave the individual access to the account and did not notify the credit union that transfers by that person were no longer permissible. Therefore, the transaction would not be considered “unauthorized” under 12 CFR 1005.2(m)(1).

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OFAC has updated the SDN list as of April 30, 2018. The last update prior to this was April 27, 2018.

Questions? Contact the Compliance Hotline: 1.800.546.4465, compliance@nwcua.org.