NAFCU Compliance Blog

Regulatory Compliance School Kicks Off; March 2015 NCUA Report; NCUA Tidbits

Written by Bernadette Clair, Senior Regulatory Compliance Counsel

Regulatory Compliance School Kicks Off. NAFCU’s Regulatory Compliance School begins today!  During this intensive week, attendees will obtain a solid understanding of the various regulations and laws affecting credit unions’ regulatory compliance responsibilities. Many of these brave souls will also be studying hard to obtain their NAFCU Certified Compliance Officer (NCCO) designation. Wish them luck!

As a reminder, NAFCU’s Compliance Team will be in and out of the office giving presentations, so our response times may be a little longer than normal.

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March 2015 NCUA Report. NCUA recently released its March 2015 Report. Featured articles include:

Office of National Examinations and Supervision Report: Funnel Accounts: A Funny Name, but a Serious Concern

Chairman’s Corner: Volunteers: Inspire and Question Management

Office of Examination and Insurance Report: Loan Growth at a Nine-Year High

Board Perspectives: Charter Choice and the Law of Natural Selection; True Transparency and Real Regulatory Relief

Board Actions February 2015: NCUA Board Proposes $100 Million Threshold for Regulatory Relief; Share Insurance Fund Trends Positive, Taunton Charter Expansion Approved

Region I Report: A Quick Guide for New Supervisory Committee Members

Office of National Examinations and Supervision Report: Cyber Vulnerabilities and the Real Exposures

Funnel Accounts. Two articles caught my eye. First, an article on funnel accounts discusses the growth of funnel accounts, warning signs of funnel accounts, and BSA reporting requirements related to these types of money laundering schemes.  For additional background, my colleague Shari Pogach blogged about funnel accounts and trade-based money laundering here.

Quick Guide for New Supervisory Committee Members. The second article takes a look at some of the responsibilities of the supervisory committee beyond the audit and verification roles.  Topics covered include strengthening internal controls, reviewing management’s corrective actions, and the authority to call special meetings and remove officials.

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NCUA Spoofing Scam Warning.  Last week, NCUA warned that scammers are “spoofing” an agency telephone number and sending texts to consumers in an attempt to obtain personal information. More details are available here. This follows on the heels of a warning about an online phishing scam using a logo and design similar to the agency’s own. For more details, see our March 25th blog post.  

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NCUA Video Series for Credit Unions Seeking CDFI Certification. NCUA has released a five-part video series for credit unions interested in becoming certified as Community Development Financial Institutions.  The videos, less than 10 minutes each, are available on NCUA’s YouTube channel and cover topics such as the criteria for certification as well as the benefits.

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NCUA Grant Initiatives Webinar. NCUA will be hosting a webinar entitled “NCUA 2015 Grant and Loan Opportunities” for credit unions interested in applying for the next round of grants from the agency. Topics to be discussed include the grant application process and the four grant initiatives that NCUA will fund: cybersecurity, building capacity branching, digital growth and new products and services. The presentation will be followed by a 30-minute question-and-answer session. The webinar is scheduled for Wednesday, April 15, beginning at 2 p.m. Eastern. Online registration is available here. Participants may submit questions in advance at [email protected]. The subject line of the email should read, “NCUA 2015 Grant and Loan Webinar.”

NCUA Online Supervisory Committee Training Modules

Written by Bernadette Clair, Regulatory Compliance Counsel

Earlier this week, NCUA released a series of six training videos designed to help new supervisory committee  members at small and low-income credit unions understand their roles and responsibilities.

The video series is available on YouTube here and includes the following modules:

• Supervisory Committee Training – Overview

• Supervisory Committee Training - Monitoring Management Activities

• Supervisory Committee Training - Annual Audit

• Supervisory Committee Training - Verification of Member Accounts

• Supervisory Committee Training - Handling Member Complaints

• Supervisory Committee Training – Resources

NCUA Board Chairman Debbie Matz commented on the release of the videos:

“NCUA is committed to providing training and support to small and low-income designated credit unions so they are able to continue to meet the needs of their members,” said NCUA Board Chairman Debbie Matz. “We chose the supervisory committee as our target audience because of the critical role these committee members play in ensuring the safety and soundness of the credit union. Our intent is that by providing free, accessible training it will be easier to recruit volunteers and increase the effectiveness of committee members.”

Each video is a short 10 minutes or less, and provides a quick overview of supervisory committee responsibilities. Other helpful resources for supervisory committee members referenced in the videos include NCUA's Supervisory Committee Guide for Federal Credit Unions and Chapter 5 of NCUA's Examiner Guide.  NCUA also indicated that it plans to release additional operational and regulatory training modules in 2014 so stay tuned on that front. 

Have a great weekend everyone!

NAFCU's Regulatory Compliance School Just Got Better - Regulatory Update Day

Written by Steve Van Beek

We've heard you!  For the past couple of years, we've received the following feedback about NAFCU's Regulatory Compliance School (paraphrased, of course):

"School is great and provided a solid foundation for understanding the regulatory requirements credit unions face on a daily basis.  BUT, the rules are changing so fast that it would be great to receive updates on what has just changed and what is changing next."

With this in mind, we've created Regulatory Update Day at NAFCU's 2013 Regulatory Compliance School (March 18-23 in National Harbor, Maryland).  

Regulatory Update Day (Thursday, March 21st) will provide:

• A clear understanding of what changes NCUA has in store for 2013 – including their Exam Focus

• An overview of the scope and applicability of the CFPB’s seven new mortgage regulations*

• A detailed look at the CFPB’s Qualified Mortgage/Ability-to-Repay requirements*

• Answers to Frequently Asked Questions on the mortgage rules from NAFCU’s compliance team*

• Insight from credit union attorneys and practitioners on how best to set up your implementation strategy

You can find more information on Regulatory Update Day here.  The three sessions with the "*" are sessions that are also part of NAFCU's Mortgage Reform Webcast Series.

The other 4 days of Compliance School will remain the same as will the opportunity to take the NAFCU Certified Compliance Officer (NCCO) exams.  Good luck!  

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And, all attendees at NAFCU's 2013 Regulatory Compliance School will receive NAFCU's 2013 GPS (coming soon!) as well as NAFCU's Scope & Applicability Charts.

Remember:  You do not need to be a NAFCU member credit union to attend NAFCU's conferences or webcasts.  In fact, you don't even need to work at a credit union.  Each School usually features a handful of consultants, vendors and other credit union "peeps" who support credit unions - in one way or another - on a daily basis.      

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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.   

Research Tip: Bylaws; Shameless Plug for Supervisory Committees

Posted by Anthony Demangone

I cannot tell you exactly how many times I researched bylaw issues this year, but it has been a bunch.  A federal credit union's bylaws touch upon so many important issues:

• Expulsion and limitation of services
• Elections
• Par value requirements for members
• How a credit union sets up its lending program
• Training issues
• Indemnification issues

I could go on, but I think you get the point.  With that in mind, here are a few things you should have handy.

1. A fresh copy of your FCU's bylaws.  You should have a hard copy near your desk or an electronic version saved to your computer.  NCUA allows a good deal of variety when it comes to bylaws.  A FCU is not required to adopt new provisions when NCUA issues a new set of standard bylaws, so you'll have to research your own set to get a definite answer for a given issue.
2. Familiarize yourself with NCUA's federal credit union bylaws web page.   This will have links to some of the more recent versions of NCUA's "model" or "standard" bylaws. 
3. There are also a good deal of bylaw amendment opinions located here.  If you search NCUA's website and select "legal opinion," these don't seem to pop up for some reason.  So it may be worth your time to review this area when researching a bylaws issue.
4. Finally, don't forget to research the issue searching through NCUA's legal opinion letters. 

Supervisory Committees.  Every credit union has a supervisory committee, but you don't hear a bunch about this important part of a credit union's corporate structure.  When NCUA issued its fiduciary duties rule, the fiduciary duties portion of the rule strangely didn't address duties for supervisory committee members.  When researching issues related to this committee, the Holy Grail continues to be NCUA's Supervisory Committee Guide.   Do your credit union a favor: Give every member of your credit union's supervisory committee a copy of this guide.  Print it out and give it to them in a binder.  In addition, you might want to send them the link to the guide that I provided in this blog post. 



Speaking of Supervisory Committee Members.   I always thought NAFCU could do more for supervisory committee members in the area of education.  Well, we finally devoted a large chunk of education time and resources for this important committee in this year's NAFCU Annual Conference.  You may want to forward this post to your supervisory committee members and have them review the educational sessions designed just for them. 

This and That...

Posted by Anthony Demangone

Here are a few items that I wanted to share.

• NAFCU's senior management team and board of directors just visited the Federal Reserve.  For our annual visit, we always prepare our "Fed Report," which you can download here.  For those who write articles, board reports, or other industry-related items, the report provides a nice overview of the credit union industry. 
• Here's an interesting piece (Governance and Strategic Planning Blog) on the Audit/Supervisory Committee's possible role concerning credit union policies. 
• The FTC has released these gift card buying tips. If your credit union has a blog, Twitter feed or Facebook page, this might be something nice to share.
• Now that most credit card issuers must submit their agreements to Fed, we can expect more articles and blog postings like this one from Felix Salmon.  The article links to two lists - the 10 most difficult to read credit card agreements, and the 10 wordiest credit card agreements.  Credit unions are on both lists. I'd check to see if your shop is on either list. 
• In the midst of the current recession, it seems that financial illiteracy/indifference may be increasing. (Walletpop.com)  I'm all for financial literacy, but sometimes I wonder how useful all the efforts are to force financial literacy down the throats of consumers.  It seems to me that when someone is interested in their finances, there's more than enough information available to answer their questions.
• It seems the GOP will hold the CFPB's feet to the fire. (WSJ.com)  As much as they can, anyway. 
• NCUA recently issued the latest batch of its Prohibition orders.  If anyone out there thinks insider fraud isn't a problem, they should take a look at these orders.  One involves an order for restitution for more than $2 million.  

Good to be back! This and That

Posted by Anthony Demangone

Last week's compliance seminar was a huge hit. Here's a quick shot I took from the back of the room.  If you stare at the picture long enough, you will actually begin to understand the risk-based pricing notice regulation.  

Here's one great tip that I heard from an NCUA official during the conference.  When you send a waiver request to a regional director, be sure to work with your examiner.  The official said when a request for waiver comes in from a credit union, a regional director usually reaches out to the credit union's examiner to get their input on what to do.  If you kept the examiner in the loop regarding your request, they won't be surprised.  If an examiner supports a waiver request, that goes a long way, according to the official.

My email inbox.  I would enjoy business travel more if the world stopped spinning while I was out of the office.  That still doesn't appear to be an option, so here are some of the interesting items that I want to share.

St. Paul Croatian Federal Credit Union.  NCUA's office of inspector general has released a material loss review examining the failure of Saint Paul Croatian Federal Credit Union.   Wow.  That's about all I can say. Fraud, weak internal controls, and weak NCUA supervision are all discussed in the report.  If you are into internal controls and risk management, you may want to sit down as you read this one.

SAFE Act Fees.  You probably already heard this, but Conference of State Banking Supervisors floated a proposed schedule of SAFE Act related fees.  While this is just a proposal and your input is sought, you should look at the numbers and inject them into the budget process if it is not too late.  

NCUA Report.  NCUA has released the most recent issue of the NCUA Report.   This report contains a ton of information on recent corporate stabilization efforts, multi-featured open-end lending plans, and supervisory committees. NCUA's article contained a link to this top-ten list from KPMG regarding the top 10 things audit committees should be doing this year.  And I love top 10 lists.  This one particularly. 

BSA and Boards.  In the most recent issue of the SAR Activity Review, FinCEN writes an article (starting on page 33 of the issue) designed to help financial institution boards understand the value of BSA-related filings made by financial institutions.  It might be useful to include in your next board packet. (Hat tip to Mr. Clarke.)

Credit CARD Act.  The OTS has updated the Regulation Z portion of its examination procedures to include information about the CARD Act.  It is a nice resource if you need an overview.