NCUA Issues Joint Statement with Other Regulators on BSA Enforcement

FinCEN also issued a statement describing factors used determine the appropriate enforcement response to actual or possible BSA violations.

8/25/2020

The National Credit Union Administration recently released a joint statement with other federal financial institution regulators on the enforcement of Bank Secrecy Act/anti-money laundering requirements. In addition, the Financial Crimes Enforcement Network released its own statement on Enforcement of the BSA.

NCUA Joint Statement

The joint statement is intended to clarify that isolated or technical violations or deficiencies are generally not considered the kinds of problems that would result in an enforcement action. The statement addresses how the agencies evaluate violations and determines the appropriate enforcement action, such as a cease and desist order.

The NCUA issued the regulations that require credit unions to establish and maintain BSA/AML compliance programs. A BSA/AML compliance program must include a Customer Identification Program with risk-based procedures that enable the credit union to for a reasonable belief that it knows the true identity of its members.

The NCUA is required to examine credit unions’ BSA/AML compliance programs. When the NCUA identifies supervisory concerns related to a credit union’s BSA/AML compliance program, the NCUA will communicate those concerns by various formal and informal means. These methods include:

  • Informal discussions by examiners with an institution’s management during an examination or ongoing supervision processes;
  • Formal discussions by examiners with the board of directors as part of or following an examination, or as part of the ongoing supervision processes;
  • Written communications from examiners or the Agency to an institution’s board of directors or senior management that communicate concerns regarding the implementation of its BSA/AML compliance program;
  • A finding contained in the report of examination or in other formal communications from an Agency to an institution’s board of directors or senior management indicating deficiencies or weaknesses in the BSA/AML compliance program; or
  • A finding contained in the report of examination or in other formal communications from the Agency to an institution’s board of directors or senior management of a violation of the regulatory requirement to implement and maintain a reasonably designed BSA/AML compliance program.

The joint statement provides insight into BSA deficiencies or violations that the examiners will likely respond to with cease-and-desist orders, such as:

  • Failure to establish and maintain a reasonably designed BSA/AML compliance program (CIP, CDD, BSA reporting);
  • Failure to have a written BSA/AML compliance program, that adequately covers all the requirements;
  • Failure to implement BSA/AML program that adequately covers required program components;
  • Defects in BSA/AML compliance program coupled with aggravating factors; or
  • Not providing sufficient authority, resources, or staffing to designated BSA officer.

In appropriate circumstances, the NCUA may take formal or informal enforcement actions to address isolated or technical deficiencies.

FinCEN Statement

 The statement that FinCEN issued describes the factors it uses to determine the appropriate enforcement response to actual or possible BSA violations.

Per the statement, FinCEN’s enforcement approach details the authority FinCEN has when it comes to taking actions:

  • No action. FinCEN may close a matter with no additional action. FinCEN may reopen the matter if FinCEN obtains new material information concerning the matter or becomes aware of additional or subsequent violations.
  • Warning letter. FinCEN may issue a warning through a supervisory letter or similar communication.
  • Equitable remedies. FinCEN may seek an injunction or equitable relief to enforce compliance when FinCEN believes an entity or individual has violated, is violating, or will violate the BSA or any BSA regulation or order.
  • Settlements. As part of a settlement, FinCEN may require both remedial undertakings and civil money penalties.
  • Civil money penalties. FinCEN may assess a civil money penalty.
  • Criminal Referral. If circumstances warrant, FinCEN may refer a matter to appropriate law enforcement agencies for criminal investigation and/or criminal prosecution.

In all matters, FinCEN will consider the need to impose compliance commitments deemed necessary and appropriate to ensure that financial institutions are fully complying with their BSA obligations.

FinCEN considers a range of factors when evaluating an appropriate disposition. The weight given to any factor in contemplation of the potential dispositions identified above may change based on the relevant facts and circumstances of the case. The factors FinCEN considers may include the following:

  • Nature and seriousness of the violations, including the extent of possible harm to the public and the amounts involved.
  • Impact or harm of the violations on FinCEN’s mission to safeguard the financial system from illicit use, combat money laundering, and promote national security.
  • Pervasiveness of wrongdoing within an entity, including management’s complicity in, condoning or enabling of, or knowledge of the conduct underlying the violations.
  • History of similar violations, or misconduct in general, including prior criminal, civil, and regulatory enforcement actions.
  • Financial gain or other benefit resulting from, or attributable to, the violations.
  • Presence or absence of prompt, effective action to terminate the violations upon discovery, including self-initiated remedial measures.
  • Timely and voluntary disclosure of the violations to FinCEN.
  • Quality and extent of cooperation with FinCEN and other relevant agencies, including as to potential wrongdoing by its directors, officers, employees, agents, and counterparties.
  • Systemic nature of violations. Considerations include, but are not limited to, the number and extent of violations, failure rates (e.g., the number of violations out of total number of transactions), and duration of violations.
  • Whether another agency took enforcement action for related activity. FinCEN will consider the amount of any fine, penalty, forfeiture, and/or remedial action ordered.
Question of the Week

Q. When opening a new account, are we permitted to provide disclosures electronically?

A. As long as the credit union’s member, or potential member, has agreed to accept communications electronically under the E-Sign Act (via their electronic device), it may provide any disclosure required under Truth in Savings in an electronic format.

Resources

12 CFR 707.4(a)(ii)
Truth in Savings Commentary

Legal Briefs

National Credit Union Administration

Agencies Issue Statement on BSA Due Diligence Requirements for Customers Who May be Considered Politically Exposed Persons
The NCUA, along with other Federal agencies, issued a joint statement clarifying BSA due diligence requirements for customers who may be considered “politically exposed persons” (PEPs). The statement clarifies that credit unions must apply a risk-based approach to CDD in developing the risk profiles of their members, including PEPs. More specifically, banks must adopt appropriate risk-based procedures for conducting CDD that, among other things, enable banks to: (i) understand the nature and purpose of customer relationships for the purpose of developing a customer risk profile, and (ii) conduct ongoing monitoring to identify and report suspicious transactions and, on a risk basis, to maintain and update customer information.

Consumer Financial Protection Bureau

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CFPB Extends Comment Period on RFI to Prevent Credit Discrimination
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Financial Crimes Enforcement Network

Statement on Enforcement of Bank Secrecy Act
FinCEN released a statement that sets forth its approach to enforcing the rules and regulations within the BSA.

Internal Revenue Service

IRS: Deadline to return distributions to retirement accounts is Aug. 31
The IRS reminds IRA owners, beneficiaries or workplace retirement plan participants who received requirement minimum distributions (RMDs) for 2020 that they have until Aug. 31 to rollover or repay the distribution to avoid paying taxes.

Office of Foreign Assets Control

OFAC has updated the SDN list as of Aug. 20. The last update prior to this was Aug. 17.

Questions? Contact the Compliance Hotline: 1.800.546.4465; [email protected].