NAFCU Compliance Blog

Compliance Resources: Newsletters; Webinars; Webcasts

Written by Steve Van Beek

Today's post seeks to aggregate some useful compliance resources. 

NCUA Listening Session.  The first of NCUA's six listening sessions is today in Boston.  Registration for all sessions is now available here.  

NAFCU Members.  The May 2012 NAFCU Compliance Monitor is now available.  This month the articles look at the CFPB's movements in mortgage servicing as well as third-party service providers.  For those who missed the April 2012 BSA Blast, it is available here.    

Both the Compliance Monitor and the BSA Blast are NAFCU-member publications.  If your credit union is interested in NAFCU membership, check out our trial membership program.  Additional member benefits are discussed here.  

If you are a NAFCU-member and would like to be added to the Compliance Monitor and BSA Blast email notification lists, just send us an email - compliance@nafcu.org.  

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Vendor Risk Management Webinar.  The Philadelphia Federal Reserve is hosting a free Risk Management Webinar today at 2:00 Eastern.  The slides are already up and available here.  

FinCEN Webinar.  FinCEN will be hosting a free May 8th webinar discussing the technical specifications of the new SAR, CTR and DOEP forms.  Registration is here.   

Note:  This webinar promises to be very, very technical and geared toward IT folks.  Be sure to pass this along to anyone at your CU who fits the bill.  FinCEN will be conducting a future webinar for compliance professionals. 

CU Online Upgrade Webinar.  NCUA recently announced an upcoming upgrade to CU Online.  The upgrade is scheduled for May 28th and NCUA is hosting a free May 15th webinar discussing the upgrade.  Registration is here.  

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NAFCU Webcasts.  We also have a series of upcoming webcasts that might be of interest:

• May 9th:  Essential Financial Literacy Education (Sign up today and save $100)
• May 17th:  IRA Compliance: Managing a Successful IRA Program
• May 24th:  An Inside Look at NCUA's Interest Rate Risk Rule

Remember, all NAFCU webcasts are available for one-year after the purchase date and can be viewed numerous times.  The Financial Literacy webcast is a good example.  Not many credit union Boards meet at 2:00 p.m. on a Wednesday - but your credit union can use the webcast at a Board meeting or training session by accessing the "on-demand" version. 

All NAFCU webcasts are listed here (both upcoming live webcasts and on-demand webcasts).  

Noninterest-Bearing Transaction Account Q&A; NAFCU's 31st Board of Directors Conference

Written by Steve Van Beek

Two months ago NAFCU held a webcast on NCUA Share Insurance Coverage - Expectations and Disclosures.  One of the questions from the live webcast was on noninterest-bearing transaction accounts and I wanted to share the Q&A with blog readers.

"Question:  We have a question about the requirement to notify members if we alter their noninterest-bearing transaction account.  Our credit union currently offers only noninterest-bearing transaction accounts – which are fully insured until December 31, 2012.  If we added a new checking account which would offer dividends would we be required to notify members?  What about if members switched from our noninterest-bearing transaction account to our new product that pays dividends?

Answer:  Great questions.  Let’s tackle them separately.  For the first question, the credit union would not be required to notify members when you add a new product that pays dividends.  Your members with the existing noninterest-bearing transaction account are not being impacted by the creation of the new product.  The terms and conditions on the existing noninterest-bearing transaction account are not being altered and, thus, no notice would be required to the members.  Those accounts will remain fully insured until December 31, 2012. 

For the second question, the credit union would not be required to notify members that voluntarily close their noninterest-bearing transaction account and open an account that pays dividends.  The credit union has not made a change to the terms of the noninterest-bearing transaction account and, thus, no notice would be required. 

That being said, it would be a good member service to notify members that their decision to close their noninterest-bearing transaction account and move toward a dividend-paying transaction account could impact their share insurance coverage.  While not required, this notification could be important – especially for members with large balances."

Without additional Congressional action, the unlimited share insurance coverage for noninterest-bearing transaction accounts will expire on December 31, 2012.   

Note:  We blogged on noninterest-bearing transaction accounts in the past as well:  June 22, 2011; June 3, 2011; May 27, 2011; May 26, 2011; and May 24, 2011.   

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Now for a long shameless plug that you might want to pass along to your Board or Supervisory Committee.

NAFCU's 31st Board of Directors and Supervisory Committee Conference.  NCUA’s Inspector General William DeSarno and Deputy Inspector General Jim Hagen will be presenting at NAFCU’s 31st Annual Credit Union Board of Directors and Supervisory Committee Conference, May 16-18 in Palm Springs.  

You might be wondering what does NCUA's Office of Inspector General do?  Among other duties, they write the Material Loss Reviews (MLRs) which discuss what issues helped cause a credit union to fail or need a merger.  These provide a great opportunity to learn from others (July/August 2010 Compliance Central from The Federal Credit Union magazine).

Additionally, Anthony has a great blog post today on NAFCU's CU Musings Blog which highlights some of the findings in these MLRs and looks at a common theme.   

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The early registration deadline was Friday, March 23 – but I’m extending the $100 savings until this Friday, March 30 for blog readers (or anyone they pass the word on to). Use the code VCDIS for each registration from your credit union to save through Friday, March 30.  

Board members and Supervisory Committee members who attend have the ability to earn certificates for both Bank Secrecy Act training and Financial Literacy training.  

Additionally, I'll be presenting on the Consumer Financial Protection Bureau and you can be assured your Directors and Supervisory Committee members will receive the latest information about the CFPB's actions and how they will impact credit unions.    

FinCEN Issues Advisory on SAR Confidentiality

Written by Bernadette Clair, Regulatory Compliance Counsel

FinCEN released an advisory on March 2, 2012, reminding financial institutions, and the lawyers that advise them, of the requirement to maintain SAR confidentiality.  Apparently, there has been an uptick in the number of private parties seeking SARs from financial institutions – private parties who shouldn’t know a SAR exists.

FinCEN’s advisory is a stern reminder that financial institutions, and their current and former directors, officers, employees, agents, and contractors, are prohibited from disclosing SARs, or any information that would reveal the existence of a SAR.  In addition, civil and criminal penalties can be imposed for the unauthorized disclosure of a SAR.  From the advisory:

“FinCEN reminds financial institutions to be vigilant in maintaining the confidentiality of SARs. This includes ensuring all employees, agents, and individuals appropriately entrusted with information in a SAR are informed of the individual obligation to maintain SAR confidentiality. This obligation applies not only to the SAR itself, but also to information that would reveal the existence (or non-existence) of the SAR. Likewise, such persons should be informed of the consequences for failing to maintain such confidentiality, which could include civil and criminal penalties as explained herein.

A financial institution may consider including such information as part of its ongoing training of all employees. Furthermore, financial institutions may want to remind their counsel of the strict requirements of SAR confidentiality. Additional risk-based measures to enhance the confidentiality of SARs could include, among other appropriate security measures, limiting access on a "need-to-know" basis, restricting areas for reviewing SARs, logging of access to SARs, using cover sheets for SARs or information that reveals the existence of a SAR, or providing electronic notices that highlight confidentiality concerns before a person may access or disseminate the information.”

My takeaway:  It might be a good idea to review the internal controls you have in place to protect SAR confidentiality – you don’t want to be the weak link.

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Tomorrow I’ll be speaking at compliance school on BSA/OFAC compliance.  For those of you taking the NCCO certification exams…study hard, the end is in sight!

With NAFCU staff at school this week, keep in mind that response times to compliance questions may be a little longer than usual.

Talking About the CFPB

Written by Steve Van Beek

Yesterday, I had the opportunity to give a presentation on the Consumer Financial Protection Bureau.  You may have heard of these guys.  It was a fun presentation with a very good questions from the attendees.  

I wanted to share a recent article on the CFPB that I wrote for The Federal Credit Union.  The article takes "A Closer Look at the CFPB" and discusses the following areas:

• The CFPB's Supervision and Examination Powers;
• The CFPB's Regulatory Authority;
• Unfair, Deceptive or Abusive Acts or Practices (UDAAP); and
• Additional Areas of Focus.

The full article is here and might be useful to share with your colleagues, senior management and your Boards.  Note: Since the article was written, the CFPB has already moved forward on regulating nonbanks.

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The CFPB will not be a passive agency and there will be plenty more CFPB issues to discuss in the future.  I'll be talking about the CFPB at future NAFCU Conferences as well, including:

• NAFCU's Board of Director and Supervisory Committee Conference - May 16-18 in Palm Springs, CA;
• NAFCU's Annual Conference & Exhibition - July 24-28 in Nashville, TN; and
• NAFCU's 2012 Regulatory Compliance Seminar - October 23-26 in Seattle, Washington.

Of course, we'll be talking more than just the CFPB - but you can be assured you or your colleagues will receive the latest on the CFPB and how its actions will impact your credit union.   

Regulatory Review: A Look at Part 701.33; Reg Alert on TDRs

Written by Steve Van Beek

Yesterday, we discussed NCUA's annual regulatory review.  I mentioned a couple of weeks ago that I hoped NCUA would review their guidance as well.  An example might help illustrate how NCUA could review their guidance and reduce the headaches for compliance officers.  

Part 701.33.  NCUA will be reviewing Part 701.33 of its regulations which addresses reimbursement, insurance, and indemnification of officials and employees.  To me, it would be very beneficial to credit unions if NCUA's review of Part 701.33 involved an analysis of their opinion letters and whether it would be appropriate to clarify the regulation.  

Example.  An advanced search on NCUA's website (under the Legal Opinion Letters category) for "701.33" comes up with 30 NCUA Legal Opinion Letters.  There are extremely old letters as well as quite a few recent letters.  

Suggestion.  Considering the current 12 C.F.R. 701.33 has resulted in 30 formal legal opinion letters over the years, wouldn't it make sense for NCUA to update the regulation to codify these interpretations?  Perhaps NCUA could issue Official Staff Commentary that would provide clarity to credit unions to prevent compliance officers from having to wade through numerous legal opinion letters to ensure they have correct interpretation from NCUA.

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NAFCU Members.  NAFCU's Regulatory Alert on Loan Workouts and Nonaccrual Policy and Regulatory Reporting of Troubled Debt Restructured Loans is available.  The proposal has a short comment period with comments due to NAFCU on February 17th.  NCUA is accepting comments until March 1st.   

Comments on CUSO Proposal; BSA and Risk Managment Webcast for Directors

Written by Steve Van Beek

NAFCU has submitted our comment letter on NCUA's proposed rule on CUSOs.  You can view the comment letter here.  

Additional information is in the NAFCU Today. 

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Next Wednesday - October 5 - will feature a return performance by Anthony Demangone as he will be presenting a BSA and Risk Management webcast for Directors and Executives.

Any credit union (or other third-party) can sign up and you can save $100 by signing up through Wednesday, September 28.

Here is what will be discussed:

"Make sure your board and supervisory committee get their annual BSA training before the end of 2011!

Managing BSA compliance as a credit union board is just another form of risk management. All too often, BSA training programs focus on the technical aspects of compliance, without properly discussing risk management. This webcast, based on a heavily attended session at NAFCU’s 2011 Annual Conference, weaves risk management and BSA compliance together. Board members and supervisory committee members who watch this webcast will gain a foundational understanding of risk management, which will help them better understand their role in managing the credit union’s BSA program. Those who purchase the webcast will have the option to purchase a CD of the live broadcast to use for board and supervisory committee training sessions. Viewing the webcast can help credit unions comply with NCUA training requirements regarding the Bank Secrecy Act.

Demangone’s presentation will first address risk management:

• What are NCUA expectations regarding risk management?
• What are the seven major types of risk that NCUA examiners focus upon?
• How do credit union officials manage risk?

Regarding the Bank Secrecy Act, Demangone will cover the following:

• What is money laundering, and why do criminals attempt it?
• Important concepts of the Bank Secrecy Act regulatory system.
• What are the goals of the BSA regulatory system? (Once you know what regulators are after, other things start to make sense.)
• What about the Office of Foreign Assets Control (OFAC)?
• What are the credit union’s responsibilities for managing BSA risks?
• What is a board’s ultimate responsibility?"

 The $100 off savings ends tomorrow - so take a look today to help meet your credit union training requirements.

Robert's Rules of Order

Written by Steve Van Beek

Many credit unions use Robert's Rules of Order for their annual meetings and Board meetings.  The 11th Edition of Robert's Rules of Order is now available.  (Hat Tip to Dan M.)  There is also a listing of changes from prior versions.

NCUA's model FCU bylaws include a fill-in-the-blank section for the credit union to indicate which parlimentary authority it will use for meetings.  Here is from Article IV, Section 4 of the model bylaws:

"(k) To the extent consistent with these bylaws, all meetings of the members will be conducted according to ______________. The order of business for the annual meeting may vary from the suggested order, provided it includes all required items and complies with the rules of procedure adopted by the credit union.

The credit union must fill in the blank with one of the following authorities, noting the edition to be used: Democratic Rules of Order, The Modern Rules of Order, Robert's Rules of Order, or Sturgis' Standard Code of Parliamentary Procedure."

Be sure to check your credit union's own bylaws and note that if the credit union updates to the 11th edition of Robert's Rules of Order - it would need to amend its bylaws to reflect the edition being used.

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Have a great weekend!   

1000th Blog Post; Compensation to Directors

Written by Steve Van Beek

I hope everyone had a great long weekend.  I wanted to thank all the loyal readers out there as today marks the 1000th blog post for the NAFCU Compliance Blog.  You guys are what makes the blog great - thank you!    

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Last week, NCUA issued Legal Opinion Letter 11-0805 regarding compensation for volunteers.  Here is the opening paragraph:

"Thank you for your letter to the General Counsel of July 23, 2011, seeking our opinion on whether Hudson Valley FCU’s policy of giving a Volunteer Service Award of a $250 Visa gift card is permissible under NCUA’s rule limiting compensation of officials, 12 C.F.R. 701.33 (“the Rule”).  The policy provides for such awards “at the end of each five-year period of service” to volunteers who may include members of the credit union’s board of directors (“BOD”) and committees. As explained below, our opinion is that a Volunteer Service Award recognizing an individual director’s or committee member’s substantial length of service is permissible under the Rule so long as the award is nominal in valuein proportion to the period of service it covers."  (emphasis added).

What is nominal?  From the closing of the letter:

"Based on our prior opinions, and adjusted for inflation, we would consider a maximum of $50 per year of service to be 'nominal.'"

One of the prior opinions from NCUA on this issue is a 1993 letter where NCUA took the same position for nominal gifts.  

May I play devil's advocate for a moment?  Thanks.  Considering that NCUA has had the same opinion since at least 1993 - why doesn't NCUA amend 12 C.F.R. 701.33 to provide an additional exception to the definition of "compensation"?  There are already three exceptions in Part 701.33(b) to the definition of "compensation" so this wouldn't be new territory.  

Why make credit unions research and review legal opinion letters to find this longstanding exception?  Remember - NCUA reviews 1/3 of their regulations each year.  It appears Part 701.33 will come back up for review in 2012.  Hopefully NCUA will take the initiative and add this exception to the regulation itself.

Of course, be sure to review the full letter if your credit union offers a similar award or is thinking about doing so.  

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Again - wanted to thank you for supporting the blog and supporting NAFCU!  Tomorrow will be post 1001 - see you there!     

Adverse Action Notices; Fiduciary Duties Policy; NCUA Webinar

Posted by Sarah Loats Zimmermann

Adverse Action Forms. Confusion abounds surrounding the proposed adverse action forms under Reg B. The confusion probably stems from the fact that the change required by the Dodd-Frank Act (to include credit scores and other information in an adverse action notice) is a change to the FCRA adverse action notice requirements. Changes are not being made to the ECOA/Reg B adverse action requirements at this time.

However, very often a credit union needs to send both adverse action notices at the same time. Therefore, the Federal Reserve created model forms that combine the Reg B and FCRA adverse action notice requirements. These model forms are housed in Appendix C to Reg B, and because there are changes to the FCRA notice requirements the Federal Reserve needs to change those model forms that purport to satisfy both the Reg B and FCRA adverse action notice requirements.

The proposed model forms were published in the Federal Register in March. The FCRA notice requirements kick-in July 21, 2011 per the Dodd-Frank Act. Final forms have not yet been issued, but keep an eye out for them because July 21 is just around the corner. If you are itching for a more detailed discussion of this issue, please see the Background section of the proposed rule. If that link doesn't work for you, go to the Fed's press release announcement. You can access the proposed rule from there as well.


Fiduciary Duties Policy.  NAFCU members, another very generous member has offered a sample Fiduciary Duties policy for the policy exchange library. If you'd like to review it, you can go to the library and peruse the Miscellaneous section. It is aptly named Fiduciary Duties. And when that generous nature strikes you, please consider offering a sample policy of your own.

 

NCUA Webinar.  NCUA will be holding a free webinar Thursday May 26 (tomorrow) at 4 pm. The topic is the proposed voluntary prepaid Corporate Stabilization Fund assessments program that NCUA announced at its May 19 Board meeting. NCUA's press release about the webinar contains a link to register.

NCUA Board Meeting; ALLL Webinar; Term Limits?

Posted by Anthony Demangone

OK, this really is my last blog post!

Good morning, folks.  I hope everyone had a great weekend.  Das Twins, Mandy and I ventured to the Baltimore Zoo this weekend with friends.  I always love any visit to "Charm City," and the zoo was fantastic. 

Now, back to our regulatory zoo.

NCUA.  They released the agenda for this Thursday's NCUA Board Meeting.  I was expecting to see a CUSO rule, but it was nowhere to be seen.  Here are the items of interest:

1. Final Rule - Part 740 of NCUA's Rules and Regulations, Accuracy of Advertising and Notice of Insured Status.
2. Final Rule - Part 745 of NCUA's Rules and Regulations, Share Insurance and Appendix.
3. Final Rule - Part 750 of NCUA's Rules and Regulations, Golden Parachute and Indemnification Payments.
4. Proposed Rule - Part 705 of NCUA's Rules and Regulations, Community Development Revolving Loan Fund.
5. Voluntary Prepayment of Stabilization Fund Assessment.
6. Insurance Fund Report.

ALLL.  NCUA has released the agenda for an "Allowance for Loan and Lease Losses" webinar that will be held on May 26.   In NCUA's words:

The webinar will facilitate credit unions’ understanding of the 2006 Interagency Policy Statement on the topic. Credit unions have worked to understand how qualitative and environmental (Q&E) adjustments can better inform their estimates of inherent losses existing in the loan portfolio. The NCUA presenters will benchmark best practices in this area. The webinar will be interactive with opportunities for two-way communication.

I've said this before, and I'll say it again.  Regulators don't offer these webinars just for kicks.  They must see some problems or confusion in this area.  For that reason, find the person at your credit union responsible for the ALLL process, and make sure they know about this webinar. 

Term limits for directors.  We get quite a few questions each year about term limits for federal credit union directors.  The theory behind a term limit is that it forces turnover on a board.  Proponents of term limits say that such policies bring fresh ideas to a board that may have stagnated.  Opponents say such policies push great directors out the door for no reason.  NCUA's official position on this issue is clearly laid out in this legal opinion.   

It is our long-standing position that the only eligibility requirements for federal credit union board membership are those contained in the Act. That is, as long as an individual is a member of the FCU (Section 111 of the Act, 12 U.S.C. ~1761) and has not been convicted of a crime involving dishonesty or breach of trust (Section 205(d) of the Act, 12 U.S.C. ~1785(d)) (or if he has been convicted of such a crime, the NCUA Board has waived the Section 205(d) prohibition), he is eligible for election to the board of directors. Article VI, Section 7 of the Standard Federal Credit Union Bylaws permits an FCU's board of directors to set a minimum age requirement.

We have consistently rejected proposed nonstandard bylaw amendments or FCU policies that restrict completely any member's eligibility to run for the board of directors. In our view, such proposed bylaws and policies are impermissible because they serve as an absolute bar against an FCU member running for and serving on the board for a particular term, in conflict with the Act.

This does not, however, preclude an FCU's board and nominating committee from having a policy of nominating only individuals who have served less than three consecutive three year terms on the board of directors. Article VI of the Standard Federal Credit Union Bylaws gives the nominating committee discretion to set standards for determining which members it deems worthy of nomination. The FCU board can provide guidance on this policy. Thus, the nominating committee can have a term limit policy. However, all members other than those nominated by the nominating committee may run for the board by submitting the appropriate petition and/or by being nominated from the floor, whichever the FCU's bylaws allow. Individuals who are nominated by petition or from the floor are not subject to the nominating committee's standards, and may not be precluded from running for the board of directors as long as they meet the criteria specified in the Act and the FCU's bylaws.

There you have it.