If You’re Responsible For Your CUs BSA Compliance, You Are On The Hook If Things Go Bad

March 5, 2020 at 9:50 am Leave a comment

If your credit union does not have adequate staff to appropriately identify and respond to suspicious activity it may be violating federal law and putting both the credit union and its BSA compliance officer at risk of being fined.

That’s my major takeaway after FinCEN recently announced a $475,000 fine against the individual who had been responsible for U.S. Bank’s AML/BSA program. This fine is in addition to a separate civil penalty already imposed on the bank. It’s a strong warning to financial institutions and should be reviewed by anyone responsible for implementing and overseeing your AML/BSA program, including your board.

The order is a not too subtle warning to all institutions that they are expected to maintain staff levels commensurate with their level of BSA risk and that they can’t rely on software to demonstrate good faith compliance. It is also a reminder that whoever is in charge of BSA compliance at your credit union has an obligation to advocate for appropriate resources.

First a quick reminder. Pursuant to 31 U.S.C. § 5318 (h) your credit union must have an anti-money laundering program that includes, at a minimum: internal policies, procedures, and controls; has a designated compliance officer; an ongoing employee training program; and an independent audit function to test its BSA programs.

Michael LaFontaine was the former chief operational risk officer at U.S. Bank National Association. In this capacity he had overall authority and responsibility for BSA compliance. FinCEN determined that he willfully violated these core responsibilities.

Most importantly, he capped the number of alerts that the bank’s BSA monitoring software would generate resulting in thousands of potential BSA violations going unreported. He did this even after Wachovia was fined by FinCEN for engaging in almost identical activity and despite being told by employees that capping reports was inappropriate.

Secondly, he was repeatedly warned by regulators and staff that the size of the bank’s BSA staff was not commensurate with its level of risk. FinCEN explains that “While he did take certain steps to upgrade the AML Program, including advocating for and receiving funding for the replacement of the system in its entirety, his actions were inadequate to correct the deficiencies.” This is a reminder to you BSA compliance people out there to document the efforts you take in the event you conclude that your staffing levels and resources are not commensurate with the credit union’s BSA risk profile.

Will The Fed’s Rate Cuts Do Any Good?

With the Dow Jones Industrial Average declining quicker than Democrats are exiting the presidential primaries, the Fed announced an emergency 50 Basis Points cut in the Fed Fund Rate on Tuesday. Let’s call this the Corona Cut. Far be it for me to question the aggregate wisdom of the Fed, but this one is a bit of a head-scratcher. My sentiments are summed up nicely by Greg Ip of the WSJ who wrote (subscription required):

“The Fed cannot save the U.S. economy from the coronavirus, for two reasons. First, it can’t restart factories that are missing parts as the virus disrupts supply chains, nor can it persuade worried vacationers to fly. Second, and potentially more important, central banks are losing their grip on the business cycle.”

Entry filed under: Compliance, Economy, Regulatory. Tags: , , , , , .

The Fraud at C B S CU Is A Wake Up Call For The Industry Tawdry Misconduct At NCUA Uncovered By Inspector General

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Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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