The NCUA recently issued a cease and desist order against Dover N.J. Spanish American FCU to correct what the agency called “substantial Bank Secrecy Act compliance problems.” The action was well-publicized in the trade journals and credit unions of all sizes should take note. Why is this action significant? Let’s start with the basics.
Q: What is a cease and desist order?
A: A cease and desist order is a regulatory tool that requires a depository institution to terminate an unlawful, unsafe or unsound banking practice. Failure to comply with such an order can result in civil money penalties, loss of deposit insurance, and/or could ultimately lead to closure of the institution. Federal and state regulatory agencies (OFIR and NCUA) have the power to issue cease and desist orders when severe action is deemed necessary to correct significant, flagrant or systemic violations of good business practices or regulatory mandates.
Q: What is known about Dover N.J. Spanish American FCU?
A: Dover is a relatively small credit union and has been serving its members for more than 37 years. It was originally chartered in 1970 to serve members of Our Lady Queen of the Most Holy Rosary church and the Morris County Organization for Hispanic Affairs in Dover, N.J. The credit union has 4,000 members and $15 million in assets.
Q: What did NCUA require this credit union to do?
A: To correct what the NCUA determined to be “substantial Bank Secrecy Act compliance problems,” the NCUA stipulated a list of 22 terms and conditions. One of the requirements directed the credit union to back-file to 2001 all Currency Transaction Reports and Suspicious Activity Reports within 60 days. Dover was required to hire a Bank Secrecy Act/Anti-Money Laundering specialist within 30 days and was also required to designate a competent, full-time BSA Compliance Officer within 10 days.
Q: What can other credit unions learn from this NCUA action?
A: First, it is important to note that neither the small size of a credit union nor the length of time it has been serving its members exempts it from having an effective BSA/AML program or from agency action. Second, there is no question that in today’s compliance environment, BSA/AML compliance is costly — although, as this action shows, it may be less costly than having to correct a deficient BSA program. Third, to have an effective BSA/AML program, regulations require that every credit union train its staff and its board of directors. The Dover cease and desist order is a “must read” for anyone involved in BSA Compliance as it outlines the necessary elements of an effective program. A copy of the order can be found on the NCUA Web site at http://www.ncua.gov/ administrative_orders/Admin/ administrative.html.
Q: Where can credit unions go for help with BSA compliance?
A: There are many BSA consultants now in the marketplace. To address growing concerns about BSA compliance, the MCUL has developed an extensive BSA training program for its member credit unions, their employees and boards of directors. This individualized BSA training program is designed to help credit unions become better prepared, fulfill regulatory requirements and thereby reduce the risk of loss. For information on BSA Training, call CUcorp at (800) 262-6285, Ext. 561, or visit www.cucorp.com.
“You Asked Us” is a regular feature of Contact Magazine, featuring questions frequently directed to MCUL Regulatory Affairs by member credit unions. Questions are chosen for publication on the basis of timeliness and those most frequently asked, with answers provided by MCUL staff. If you have a specific question you’d like to see addressed in a future “You Asked Us,” send it along with your name and the name of your credit union to MCUL Regulatory Issues, “You Asked Us,” P.O. Box 8054, Plymouth, MI 48170-8054. Questions can also be e-mailed to firstname.lastname@example.org or faxed to (734) 420-1540. Names and credit unions will remain confidential; this information is needed in case the question requires further clarification.