NAFCU Compliance Blog

Suspicious Activity Reports – Journey into the Great Abyss

Written by Bernadette Clair, Regulatory Compliance Counsel

If you’ve ever wondered what happens to all those SARs credit unions file, day in and day out, you’re not alone.  Given the regulatory burden and cost associated with BSA compliance, it isn’t any wonder that every once in a while someone wonders…is anybody reading this stuff? Or are we just wasting our time filing reports that fall into some black hole never to be seen again?

For those of us who like to see tangible results, law enforcement case examples provided by FinCEN confirm SARs don’t fall into a black hole – they are used by law enforcement and can lead to investigations, indictments, and convictions.  These case examples can be found in FinCEN’s periodic SAR Activity Review – Trends, Tips, & Issues (access the most recent issue here).  Current and past case examples are also available on FinCEN’s website here. 

 Here’s a list of the most recent law enforcement case examples from the 21^st issue of the SAR Activity Review – Trends, Tips, & Issues:

• Proactive Suspicious Activity Report Review Leads to Indictments in “Cash Back” Mortgage Fraud Scheme
• Bank Secrecy Act Records Detail Transactions Related to Illicit Smoke Shop Sales
• Bank Secrecy Act Document Analysis Helpful in Fraud Case
• FinCEN Information Helps Jury Convict Cocaine Trafficker
• Proactive SAR Review Leads to Guilty Pleas in Structuring, Bank Fraud Case
• Suspicious Activity Reports Document International Payments Underlying Illicit Human Growth Hormone Trafficking
• Proactive SAR Review Identifies Retired U.S. Military Officer Involved in Bribery Scheme

These case examples also serve as a great resource for coming up with ideas for training credit union staff and directors on BSA compliance issues.

The Federal Credit Union (TFCU) Magazine; Flood; NCUA Regulatory Review

Written by Steve Van Beek

A couple of weeks back, we highlighted the Compliance Central articles in past The Federal Credit Union magazine editions.  Well, NAFCU has recently updated and enhanced The Federal Credit Union and released a reader-friendly digital version.

To view the May/June issue of The Federal Credit Union go here and click on the image.  The digital version is interactive allowing you to click on a particular article and be taken directly to that page.  This month's issue includes articles on:

• The 55+ Advantage - How credit unions are leverageing opportunities with older Americans.
• In the Year 2022 - Are credit unions prepard for the mobile future?

This is in addition to the usual Compliance Central articles and views from NAFCU's President/CEO Fred Becker and NAFCU's Chair.  Again, the digital version is available here.  

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Flood.  The House seems on track to pass a flood insurance extension - providing an additional 60-days of coverage.  Something tells me we'll have similar stories and discussions in a few months on flood.  Additional information is available in the NAFCU Today.

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NCUA's Regulatory Review.  NAFCU has released its Regulatory Alert (12-EA-12) on NCUA's Annual Regulatory Review of its regulations.  Take a minute to analyze the regulations under review and send along your comments.  Now is the time to voice your comments and frustrations with the existing regulations.  And, by sending your comments to NAFCU - you can get your message to NCUA anonymously.  

Potential Changes to the Servicemembers Civil Relief Act

Written by Steve Van Beek

On the Tuesday after Memorial Day, I thought it was fitting to discuss some movement on Capitol Hill regarding proposed extensions to the Servicemembers Civil Relief Act (SCRA).

As reported in the NAFCU Today, the House passed an Amendment offered by Elijah Cummings (D-MD) to the 2013 National Defense Authorization Act (which also passed the House in recent weeks).  The Amendment would provide additional protections to servicemembers.  The additional protections include:

• Extending post-service mortgage protection from nine months to 12 months;
• Extending certain SCRA protections to surviving spouses;
• Extending SCRA protections to all totally disabled veterans leaving the military;
• Requiring each financial institution - including credit unions - to designate a SCRA compliance officer; and
• Requiring institutions over $10 billion in assets to maintain a toll-free number for SCRA issues.

A similar bill was introduced in the Senate.  It is expected that the Senate will take up its own 2013 National Defense Authorization Act - which it will need to pass and then the House and Senate bills will be reconciled in conference committee.

For the SCRA issues, keep an eye out as these changes come from Congress directly rather than the regulators.  If these bills pass (in one form or another), we'll be sure to provide additional information.   

Common Compliance Violations: Account Opening Disclosures for Open-End Credit

Written by Steve Van Beek

We've discussed the Philadelphia Federal Reserve's Consumer Compliance Outlook a few times - including the following common compliance violations:

• Regulation B - Spousal Signatures
• Regulation B - Adverse Action Notices

Today, I wanted to highlight a common Reg Z violation (according to Federal Reserve examiners) which stems from the multitude of changes in Regulation Z over the past 3-4 years.  And, unfortunately, we ain't seen nothing yet!

Regulation Z - Account Opening Disclosures for Open-End (Not Home-Secured) Credit Plans.  Here is the description of the issue from the Philadelphia Federal Reserve:

"The Board of Governors of the Federal Reserve System (Board) amended some of the Regulation Z disclosure requirements for open-end credit (not home-secured) in a January 2009 final rule that became effective July 1, 2010.¹⁷The changes include new requirements for account-opening disclosures.¹⁸ Consumer testing revealed that consumers responded favorably to a table format that summarized key terms (based on the Schumer Box format used for credit card solicitation and application disclosures). As a result, the Board required in 12 C.F.R. §1026.6(b)  that creditors use a table format substantially similar to model form G-17 to disclose certain key account terms.¹⁹

The failure to use a table format substantially similar to model form G-17 has been a frequent violation for account-opening disclosures for overdrafts and personal lines of credit. As with the RESPA tolerance requirements, this violation reflects the compliance challenges that arise with a significant regulatory change. Financial institutions relying on third-party software to create disclosures should verify that the software reflects the changes in regulatory requirements. For internally created software, institutions should ensure that regulatory changes are communicated in a timely manner to the IT department and that the software is tested to verify that the changes have been implemented. For a more detailed discussion of vendor risk management, refer to the Outlook article “Vendor Risk Management” in the First Quarter 2011 issue.^20"  (emphasis added).

As the underlined text indicates - this is an issue partly because of the magnitude of regulatory changes and the inability for smaller institutions to simply keep up.  

Inadequate Model Forms.  I'd also like to add another observation on why this might be a common compliance issue.  The model forms for these disclosures are located in Appendix G to Regulation Z.  From Appendix G, the account opening tables are the G-17 Series:

• G-17(A) Account Opening Model Form
• G-17(B) Account Opening Model Form
• G-17(C) Account Opening Model Form
• G-17(D) Account Opening Model Form

The article indicates that "the failure to use a table format substantially similar to model form G-17 has been a frequent violation for account-opening disclosures for overdrafts and personal lines of credit."

If you click through the model form links above, you'd see that G-17(A); G-17(B) and G-17(C) are all designed as model forms for credit card accounts.  Only G-17(D) provides any guidance on open-end account opening disclosures for non-credit cards.  Thus, three of the four forms are designed for credit cards and not other types of open-end products. 

I wonder if that is part of the reason this is a common compliance violation?  And - this is the part of the feedback loop that the CFPB needs to improve on if it truly wants to lessen the regulatory burden on smaller institutions.  If there are numerous compliance violations - the CFPB needs to look internally and see if their regulations, forms and guidance are making the requirements clear and straightforward.  

Work with Us.  Other regulators have not succeeded in the past and they also haven't shown much effort.  Usually, the regulation gets promulgated and that is the end of it.  But that isn't good enough.  It isn't good enough for the regulator, it isn't good enough for credit unions and it isn't good enough for consumers.  The real test is whether the CFPB improves in the future or whether it follows the same old story.  

More on Prepaids; NCUA Grants Available; NCUA on YouTube; Flood Insurance Update

Written by Steve Van Beek

Below are just a couple short items to help you ease into the upcoming long weekend.

CFPB ANPR on Prepaids.  The CFPB's ANPR was published today in the Federal Register.  Comments are due by July 23, 2012.  NAFCU members - our Regulatory Affairs team will have a Regulatory Alert out in the near future.

For more on prepaids, the CFPB's press release is here and Director Cordray's speech is here.  

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NCUA Grants and Loans.  Credit unions with a low-income designation might want to take a look at NCUA grants and loans through their Community Development Revolving Loan Fund (CDRLF).  NCUA has a YouTube video with additional details on the program.  

Importantly, NCUA has prioritized its 2012 grants for the following:

• Financial literacy and education in school branches;
• New product and service development;
• Staff, official, and board member training;
• Student and job creation internships; and
• Volunteer Income Tax Assistance. (emphasis added).

Additional information on the process can be found in Letter to Credit Unions 12-CU-04 and the Enclosure (which includes the grant guidelines).  

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NCUA's May Economic Update.  NCUA has a new Youtube video with their May 2012 Economic Update.  

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Flood Insurance.  The NAFCU Today has the latest on a possible Flood Insurance extension.  If you are interested in having the NAFCU Today emailed to you each day, you can sign up here.  The NAFCU Today is open to everyone who is interested.   

CFPB Looking at Prepaid Cards; ERM and CFPB Webcasts; 2012 Seminar

Written by Steve Van Beek

Prepaid Cards Field Hearing.  The CFPB recently announced a field hearing on prepaid cards - which will be held today in Durham, North Carolina starting at 12:00 p.m. EDT.  The CFPB's blog indicates to check back if you want to view the live broadcast.  [As of now, there is no link to the feed.  But, past live feeds were available here if you want to try around noon]. 

Upcoming Prepaid Card Regulation.  In conjunction with today's field hearing, the CFPB announced its intent to regulate the prepaid card market.  The CFPB announced an Advanced Notice of Proposed Rulemaking (ANPR) which is an initial step in the rulemaking process and is usually one where an agency gathers information about the market - prepaid cards in this situation - in anticipation of future regulation.  

In addition to the ANPR, the CFPB issued a Fact Sheet on Prepaid Cards and a Ask CFPB: Prepaid Cards search function on their website.   

By the way - it is good to see the CFPB's website is capable of having a search bar!  I can't wait until they upgrade to the third version of their website and provide a search bar to help credit unions and other entities find the information they need.  

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NAFCU Webcasts.  NAFCU has a full slate of webcasts for June.  Remember, all of NAFCU's events and conferences are open to anyone - this includes webcasts.  

• June 13 - Building an Effective Enterprise Risk Management Program
• June 20 - The Impact, Expectations and Future of the CFPB on Credit Unions
• June 27 - BSA for Experts - Registration available soon!

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Regulatory Compliance Seminar.  Also, don't forget to look at NAFCU's 2012 Regulatory Compliance Seminar in Seattle, Washington.  Save $100 when you register by August 31st!  For potential topics, check out this past blog post.

Upcoming NCUA Board Meeting; IRR Webcast; Top of the Mountain

Written by Steve Van Beek

Good morning - it feels good to be back.  I had the pleasure of talking to a large group of wonderful and energetic Directors and Supervisory Committee members last week in Palm Springs, California.  

NCUA Board Meeting.  NCUA has released its agenda for their May Board meeting on Thursday.  Included are the following items:

1. Final Rule – Parts 701, 703 and 7742 of NCUA’s Rules and Regulations, Reg Flex Relief.
2. Final Interpretive Ruling and Policy Statement (IRPS) – 12-1, Supervisory Review Committee.
3. Final Rule – Part 741 of NCUA’s Rules and Regulations, Troubled Debt Restructuring.
4. Quarterly Insurance Fund Report.

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NAFCU Interest Rate Risk Webcast.  Also on Thursday is a NAFCU webcast on NCUA's new Interest Rate Risk regulation.  The webcast will be broadcast live from NAFCU's headquarters from 2:00 to 3:30 p.m. EDT on Thursday, May 24th.  

Remember, the compliance deadline is September 30, 2012.  If you can't make the live webcast, you can always purchase and view the on-demand webcast at a later date.  

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And, of course - a picture from Grubb's View at the top of the Palm Springs Aerial Tramway.

BSA E-Filing Reminder; ATM Fee Disclosure Bill Update

Written by Bernadette Clair, Regulatory Compliance Counsel

FinCEN has issued a notice reminding financial institutions that effective July 1, 2012, most Bank Secrecy Act (BSA) reports must be filed electronically.  In the notice, FinCEN reiterates that as of the effective date, institutions must submit most reports electronically unless they have been granted a temporary exemption.

If you need more information on this requirement, our March 7^th blog included links to FinCEN’s final rule, along with a few E-filing resources.

FinCEN Webinar.  FinCEN held a webinar earlier this month regarding the technical specifications of the new SAR, CTR and DOEP forms.  This webinar was geared toward IT folks, so be sure to pass this along to anyone at your credit union who fits the bill.

Topics covered in the webinar include:

• Overview of the E-Filing specifications for FinCEN’s new CTR, SAR, and DOEP.
• Overview of BSA E-Filing Test site and Testing Process.
• FAQs about the E-Filing specifications.

The recorded webcast can be viewed here.

Note:  FinCEN will be conducting a future webinar for compliance professionals with BSA-related responsibilities.  The webinar will discuss the E-Filing process for the new CTR and SAR. 

Who do I call with Technical Questions related to E-Filing?  FinCEN provides the number to its BSA E-Filing Help Desk for technology-related questions:  1-866-346-9478.

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ATM Bill Update.  Last Thursday, Sen. Michael Johanns, R-Neb., ranking member of the Senate Banking Subcommittee on Security, International Trade and Finance, introduced bill S. 3204 to end the requirement to display a fee-notice placard on automated teller machines.   Steve blogged about a similar bill, H.R. 4367, last month. 

Both S. 3204 and H.R. 4367 would revise the Electronic Funds Transfer Act by eliminating the placard fee-notice rule. If the legislation is enacted, ATM owners would only be required to provide notices of fees on screen at a point when consumers can still opt to cancel their transactions.

NAFCU is urging credit unions to contact their lawmakers to urge support for S. 3204 and H.R. 4367. Dial 202-224-3121, or use our Take Action tools.

FinCEN Clarifies Timeframe for Filing SARs on Continuing Suspicious Activity

Written by Bernadette Clair, Regulatory Compliance Counsel

FinCEN recently announced the release of its 21^st issue of the SAR Activity Review – Trends, Tips, & Issues. Most of the issue focuses on Money Services Businesses (MSBs) – and is a good read if your credit union provides services to MSBs.

However, I’d like to draw your attention to guidance FinCEN provides in this issue related to the timeframe for filing SARs on continuing suspicious activity.  The guidance is designed to address uncertainty over whether ongoing activity SARs should be filed every 90 days, or after 90 days of review.

FinCEN clarifies that ongoing activity SARs should be filed no later than 120 days after the date of the previously related SAR filing, allowing for 90 days of review.  Financial institutions may also file SARs on continuing activity earlier than the 120 day deadline if the institution believes the activity warrants earlier review by law enforcement.

From the guidance starting on page 53 of this issue:

“The phrasing of the continuing activity SAR in the April 2005 article more accurately reflects FinCEN’s original intent in providing administrative relief. Financial institutions with SAR requirements may file SARs for continuing activity after a 90 day review with the filing deadline being 120 days after the date of the previously related SAR filing. Financial institutions may also file SARs on continuing activity earlier than the 120 day deadline if the institution believes the activity warrants earlier review by law enforcement. All other previously published language by FinCEN addressing the continuing activity SAR that is not related to the time period of review, e.g. cross-referencing previously filed SARs in the narrative or how FinCEN interprets the term “ongoing,” still apply."  (emphasis added).

I'm sure most credit unions have been filing ongoing activity SARs within the 90 day window, so this latest guidance is a welcome break.

Have a great weekend!

A Whole Lot of FYIs

Written By JiJi Bahhur, Regulatory Compliance Counsel

 

I thought I’d keep it simple today with a couple…okay, a whole lot of…FYIs that you may (or may not) find interesting.

  

CFPB “Sweepstakes” Scam

The CFPB has issued a notice stating that if you receive a call from the “CFPB” in regards to a “sweepstakes” offer, it is a scam. Be careful not to provide any personal, consumer, or commercial information.

 

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FinCEN SAR Activity Review – By The Numbers Issue 17

FinCEN has released its seventeenth issue of The SAR Activity Review – By the Numbers (BTN). The report is only published once a year and provides numerical data on SAR filings from the last 12 months. It is available here.

 

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NCUA’s Office of Minority and Women Inclusion

In April, NCUA filed its first report to Congress on its Office of Minority and Women Inclusion (OMWI) and is expected to issue a proposal for comment in the future on standards for assessing credit unions' diversity policies. NAFCU wrote a letter to NCUA addressing OMWI’s assessment of credit unions’ diversity policy. March 29, 2012 - OMWI Assessment of CU's Diversity Practices.

 

NCUA’s OMWI was created in accordance with the Dodd-Frank Act. Its focus is diversity, civil rights and the promotion of minority and women hiring and contracting practices throughout the credit union industry. 

 

NCUA’s 2011 annual report notes actions taken thus far toward developing standards for assessing the diversity policies and practices of entities it regulates. It also looks at steps taken within the agency to promote diversity in its own hiring and procurement practices.

 

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NCUA’s Plain Writing Act.

If you remember from Steve’s blog post on April 30^th, we were waiting to see NCUA’s Annual Report on the Plain Writing Act. That report is now available on NCUA’s webpage dedicated to the Plain Writing Act.

 

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I could keep going, but I think I’ll stop right there for now. Okay, wait…one more...FYI: I’m having twins (a boy and a girl)!