Washington Insurance Commissioner Emergency Rule May Cause Disruptions

Washington Insurance Commissioner, Mike Kreidler, issued an emergency rule that prohibits insurance companies from considering credit information in setting rates for auto, boat, RV, homeowners, and renters insurance policies.

Credit unions and other lenders may run into unexpected or unusual delays in closing on a home purchase or the purchase of a vehicle due to members delayed in obtaining insurance coverage. This may come very late in the process of completing loan or closing documents, as the lender is made aware that the insurer the consumer requested has announced a moratorium on writing new insurance business in response to the emergency rule.

At this time, it is encouraged that the consumer begin insurance coverage inquiries as early as possible in the process to allow as much time as possible to obtain and confirm the insurance coverage.

Question of the Week

Q. Are we required to implement policies and procedures specifically relating to safe deposit boxes and BSA monitoring?

A. Yes and no. Appendix F of the FFIEC’s BSA/AML Manual does indicate that certain patterns of behavior/activity directly related to a safe deposit box can be considered suspicious.

Appendix F- Other Suspicious Activity:

    • Customer visits a safe deposit box or uses a safe custody account on an unusually frequent basis.
    • Safe deposit boxes or safe custody accounts opened by individuals who do not reside or work in the institution’s service area, despite the availability of such services at an institution closer to them.
    • Customer exhibits unusual traffic patterns in the safe deposit box area or unusual use of safe custody accounts. For example, several individuals arrive together, enter frequently, or carry bags or other containers that could conceal large amounts of currency, monetary instruments, or small valuable items.
    • Customer rents multiple safe deposit boxes to store large amounts of currency, monetary instruments, or high-value assets awaiting conversion to currency, for placement into the banking system. Similarly, a customer establishes multiple safe custody accounts to park large amounts of securities awaiting sale and conversion into currency, monetary instruments, outgoing funds transfers, or a combination thereof, for placement into the banking system.
    • A safe deposit box opened on behalf of a commercial entity when the business activity of the customer is unknown or such activity does not appear to justify the use of a safe deposit box.
    • A customer accesses a safe deposit box after completing a transaction involving a large withdrawal of currency, or accesses a safe deposit box before making currency deposits structured at or just under $10,000 to evade CTR filing requirements.

Most credit unions will not have a way to produce a report that shows the frequency of access by each member to a safe deposit box. However, credit union staff generally know their members and can determine if a member is changing their routine, if the routine is suspicious to begin with, and if the situation should be monitored.

While it may not be feasible to create a report that documents safe deposit box activity, credit union staff should be trained around the red flags found in Appendix F of the BSA Manual. The red flags that are listed provide a great training tool and could be incorporated into procedures that discuss identifiable suspicious activity. Most importantly, credit union staff should be able to identify suspicious behavior and know when, how and to whom it should be reported. Branch staff is usually the best resource when it comes to identifying suspicious activity. Their training should be targeted to the situations they would most likely encounter, such as over the counter transactions, safe deposit boxes, and account opening.

Appendix F – Money Laundering and Terrorist Financing Red Flags

Compliance Alerts

National Credit Union Administration

Proposed Capital Markets Funding Program for Credit Unions: The NCUA issued Legal Opinion #21-3500 related to a credit union’s question on a proposed funding program and share insurance coverage.

Federal Reserve Board

Proposed Rule – Debit Card Interchange Fee and Routing: The FRB issued proposed changes to Regulation II (Debit Card Interchange Fees and Routing) to clarify that debit card issuers should enable, and allow merchants to choose from, at least two unaffiliated networks for card-not-present debit card transactions, such as online purchases. The FRB views these clarifications of Regulation II’s existing requirements as necessary in light of information indicating that often only one network is enabled for such transactions.

Internal Revenue Service

Reminder to tax-exempt organizations: 990s due on May 17: The IRS issued a reminder to tax-exempt organizations that operate on a calendar-year (CY) basis that certain annual information and tax returns they file with the IRS are due on May 17.

Office of Foreign Assets Control

OFAC has updated the SDN list as of April 30. The last update prior to this was April 26.

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

Posted in Compliance News, Compliance Question.