Posts tagged ‘FinCEN guidance’

FinCEN Issues COVID-19 Red Flag Alert

Yesterday evening the Financial Crimes Enforcement Network (FinCEN) issued the first in what it says will be a series of alerts highlighting red flags financial institutions should be on the lookout for during the pandemic.  The first guidance deals with medical scams.

The report highlights three categories of scams replete with examples of how compliance efforts help identify and prevent crimes.  The categories are:

  1. Fraudulent claims involving vaccines, medical tests and services
  2. Non-Delivery Fraud of Medical-Related Goods Scams; and
  3. Price Gouging and Hoarding of Medical-Related Items

Each category is accompanied by red flags for which your credit union should be on the lookout.  Many of these red flags involve making sure your credit union does extra due diligence when opening up an account for a new business specializing in medical services and supplies as well as keeping an eye out for sudden changes in a company’s business strategy.

Remember that under NCUA regulations, your credit union has the obligation to be aware of emerging fraudulent practices and to adjust its bank secrecy act protocols accordingly.

The guidance underscores just how important a role your compliance team plays for your credit union and law enforcement writ large.  When you combine millions of nervous citizens with trillions of dollars being distributed by the government with unprecedented speed, the question is not will fraud be committed but how much fraud will be committed?  The one thing all bad guys have in common is that they want to make money off their crimes.

That puts your compliance protocols to the test on a daily basis.  The department of justice recently announced that it was bringing the first criminal charges against two individuals posing as struggling restaurant owners in need of PPP funding.  They arrested the cons following a taped conversation in which the alleged owners were caught on tape lying to and FBI agent posing as a compliance officer.

May 19, 2020 at 9:05 am Leave a comment

Hemp, Opioid Guidance Issued


Two recently issued guidance documents, one from FINCEN the other from NCUA, are intended to provide assistance  to credit unions and other financial institutions in ensuring  that their BSA programs appropriately address the impact of these drugs on banking services. I’ll leave it up to you to decide for yourselves how helpful you actually find them.

First, there is the interim guidance issued by the NCUA providing an update and overview of the legality of providing hemp-related banking services. The guidance was issued as NCUA and other banking regulators face increasing pressure from Members of Congress who continue to hear complaints from home state hemp farmers in states like Kentucky that banking services are still difficult to secure.

The confusion on the part of the famers stems from the fact that late last year Congress included removing hemp from the Schedule I list of controlled substances in the 2018 Farm Bill. However, even though hemp is no longer on the list, the Department of Agriculture is responsible for promulgating regulations outlining the responsibility of states and Indian tribes that wish to make hemp production legal.

Furthermore, under the 2018 law, states have the right to decide whether or not hemp is going to be legal in their jurisdictions. Nothing can really happen without the Department of Agriculture coming out with the regs. Of course, Congressmen could simply explain that to their constituents, but it’s so much easier to push the blame onto banking regulators and their lawyers.

By the way, let’s remember that hemp is not cannabis, even though it is a closely related cousin. As a result, even when hemp is being legalized, an important part of your compliance mission will be to make sure that you are dealing with companies providing legal hemp products and not companies trying to sneak illegal cannabis in through the back door.

The second guidance, issued by FIN-CEN, is intended to give financial institutions assistance in detecting and reporting suspicious activities related to opioid production and distribution. It does this by highlighting the red flags commonly associated with the sale of these drugs “by Chinese, Mexican and other foreign suppliers.”

On that note, enjoy your day.

August 22, 2019 at 9:24 am Leave a comment

What Chairman Hood’s Pot Pronouncement Means to Your Credit Union

In an August 5, 2019 interview with the CU Times, Chairman Rodney Hood added another wrinkle to the legal/regulatory framework encasing marijuana banking when he proclaimed that Credit Unions were free to make a business decision about whether or not to offer cannabis banking services. He further explained that NCUA would not penalize these Credit Unions so long as they follow the appropriate BSA requirements along with adequately addressing safety and soundness concerns. While, the Chairman statements are welcomed, there is still much, much more that needs to be clarified when it comes to providing marijuana banking services.

First the Chairman’s comments should be followed up with a Letter to Credit Unions clarifying precisely what NCUA’s stance is. This is necessary because NCUA stance on marijuana banking has been somewhat inconsistent. For example, in 2014 it explained to Credit Unions that they would be permitted to engage in marijuana banking in states where marijuana is legal provided they followed FINCEN’s guidance on marijuana banking. But when Fourth Corner Credit Union in Colorado, a state chartered institution created specifically to provide marijuana banking services, applied for share insurance from the NCUA, the NCUA denied their request. Eventually, the Credit Union sued both NCUA and the Federal Reserve Bank of Kansas with the Credit Union settling after agreeing to very restrictive terms.

And let’s remember some core issues remain to be resolved regardless of what stance NCUA takes on the issue. Most importantly, even though Congress voted to block federal prosecutors from bringing enforcement actions against institutions providing marijuana services in states where it is legal, marijuana possession remains unequivocally illegal as a matter of Federal law. This would be true even without Jeff Sessions’ decision to revoke the Cole Memorandum, which laid out the conditions under which financial institutions would not be prosecuted for providing banking services to Marijuana related businesses.  This means we are a new Treasury Secretary away from having no Federal guidance as to how marijuana services can be “legally” provided.

Where does this leave your Credit Union? Pretty much in the same place it was a couple of weeks ago. To be sure SAR reports show that many Credit Unions have already decided that the benefits of marijuana banking outweigh the risks. But for those of you who are still gun shy Hood’s announcement, in my ever so humble opinion, without more, should not change your calculus.

August 12, 2019 at 9:50 am 1 comment

Preparing For The Day After Tomorrow

Image result for the day after tomorrowI have a lot of stuff I want to get done before going on my Christmas hiatus, so this is going to be short and sweet. There are two recently released guidance your compliance person should know about.

First, there is this joint interagency examiner guidance informing field staff how to assess a financial institution’s response to a major disaster. Let’s be honest people, the climate is acting stranger than usual and there is the unfortunate reality that your credit union and the community in which it is located could be impacted by a major disaster. How your credit union responds to these disasters is the thrust of this guidance which will be used by NCUA examiners. It stresses that examiners should assess “management’s effectiveness in responding to the changes in an institution’s bushiness markets as a result of a natural disaster and whether the institution has addressed these issues by adjusting its long-term business strategy.” In addition, examiners should expect that institutions affected by a major disaster to conduct an initial risk assessment and the ability to refine this assessment on an ongoing basis.

There is more here than meets the eye. Your institution should review this guidance and update its existing policies and procedures to reflect its concerns. You don’t want to be developing an ad hoc disaster response plan after the disaster has occurred.

A second guidance that I wanted to give you a head’s up on has to deal with our erstwhile friend, the Bank Secrecy Act (BSA). FinCEN recently announced that it had updated its ever helpful list of frequently asked BSA questions. Among the changes are an updated response to Question 16 which deals with how to report a transaction involving a government official who engages in a financial transaction greater than $10,000 as part of his or her official duties. In other words, this response would have been of no use to Elliot Spitzer.

Finally, I am pleased to report that a little less than a week ago the Federal Reserve came out with another addition of the Consumer Compliance Outlook. I was afraid that the Federal Reserve wasn’t producing these anymore which is too bad because I consider them a great resource. Typically the Reserve provides an overview of new regulations which are not so general as to be of no use to the compliance professional but not so specific as to be of little interest to the non-compliance executive.

On that note, enjoy your day and remember to follow me on Twitter @HMeierEsq. By the way, I saw The Day After Tomorrow for the first time a few weeks ago. I usually find apocalyptic adventure movies idiotic and predictable but for some reason there was something about this idiotic and predictable movie that I enjoyed. 


December 19, 2017 at 9:01 am Leave a comment

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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