The NAFCU Journal July - August 2017 - 26

''

Small institutions are
attractive with their small BSA
staffs. They are the most likely
to miss something.

''

- TODD MAGUIRE, FINANCIAL CRIME EXPERT, WOLTERS KLUWER

laundering? And what do they need to
do to avoid disciplinary action?

Staff, too, must be trained to spot suspicious activity and to properly file SARs.

The NCUA offers extensive
documentation online at www.ncua.
gov/regulation-supervision/Pages/banksecrecy-act.aspx. That's a starting place
for most credit unions.

Segerson adds that the credit union's
job is not to police its members' activity, but the credit union is expected to
notice suspicious activity and report it
to authorities.

Talk to experts, and BSA compliance
comes down to handling four things.
For an institution to pass an examination on BSA:

The costs of compliance

it must have specific internal controls
on money and processes;
■■ it must have a BSA compliance officer
(often the CEO in a smaller institution; in a large credit union, it may be
a full-time position);
■■ appropriate employees must be trained
when hired and must receive updated
training on a regular basis; and
■■ there must be regular, independent
testing of the institution's BSA policies
and processes.
■■

It gets complicated and granular. A credit
union nowadays must upgrade its "know
your customer" (KYC) efforts, and that
requires knowing a lot about the small
businesses it serves.
The ante is also upped with high-risk
businesses, such as money services
businesses.
KYC is tricky, multiple experts concede. A credit union does not want to
be suspicious of potential new members - but the government wants a
credit union to know who its members
are and to know that their use of funds
is legal.
26

Does a credit union need to invest in
software tools that automate a lot of
BSA analysis and reporting? Segerson
says no - "many small credit unions
don't need automation."
Perdue, on the other hand, says an examiner will often ask, "How do you think
you can do this without automation?"
But when volumes of transactions are
not daunting, cash handled is in smaller
amounts, and business members - if
any - engage in businesses believed to
be safe, a credit union may be able to get
by without automation.
Either way, though, the costs of compliance are not insignificant, and that's
the rub.
A big grumble about all this: There is no
ROI for BSA activities, says Matt Young,
an attorney with Weltman, Weinberg &
Reis Co.
When cash is tight, institutions may
look at how to trim BSA compliance
expenses. Segerson says NCUA
examiners run into that all the time:
"It's not uncommon to go into a small
credit union and find out they didn't
train last year because they wanted to
save money."

That's a quick way to get in trouble with
the regulators.
The solution: Make BSA compliance a
routine discipline. That's how to stay
in compliance and in the good graces
of examiners.

Targeting Smaller
Credit Unions

Is all this, in fact, necessary at smaller
credit unions? Understand that small
size does not excuse an institution from
BSA compliance. However, small size
may - and probably will - mean that
the compliance steps and required documentation are comparatively easy.
But this has to be done regardless.
Then, too, some experts say that there
are indications that criminals - money
launderers and terrorists - may be looking for smaller institutions to exploit.
"Small institutions are attractive with
their small BSA staffs. They are the most
likely to miss something," warns Todd
Maguire, a financial crime expert with
Wolters Kluwer.
"Bad guys are looking for the weak
links," says the NCUA's Segerson. "Their
sophistication is significant."
Jim Heinzman, an executive vice
president with Thetaray, a data analytics company, agrees: "Criminals are
looking for institutions that are less
sophisticated. They look for points of
weakness. Sometimes they can exploit
smaller institutions."
Bethex and North Dade Community
stand as proof of the seriousness of
that warning.
Don't despair, however. Rick Ewart, who
provides independent BSA testing to a
number of credit unions, says, "The vast
majority of credit unions I audit have no
significant issues. It's rare to see substantial issues."
Adds Ewart, "When they get in trouble
it's usually because they didn't see
little things."
THE NAFCU JOURNAL  JULY-AUGUST 2017


http://www.ncua.gov/regulation-supervision/Pages/bank-secrecy-act.aspx http://www.ncua.gov/regulation-supervision/Pages/bank-secrecy-act.aspx http://www.ncua.gov/regulation-supervision/Pages/bank-secrecy-act.aspx

Table of Contents for the Digital Edition of The NAFCU Journal July - August 2017

Our First 50 Years
Events Calendar
From the Chair
Inside NAFCU
The Digital Download
How Secure Is Your Credit Union?
The Bank Secrecy Act
2017 Annual NAFCU Award Winners
2016 NAFCU Annual Report
Getting to Know …
Management Insight
Compliance Central
Inside NAFCU Services
From the President’s Desk
The NAFCU Journal July - August 2017 - Cover1
The NAFCU Journal July - August 2017 - Cover2
The NAFCU Journal July - August 2017 - 1
The NAFCU Journal July - August 2017 - Our First 50 Years
The NAFCU Journal July - August 2017 - Events Calendar
The NAFCU Journal July - August 2017 - From the Chair
The NAFCU Journal July - August 2017 - 5
The NAFCU Journal July - August 2017 - Inside NAFCU
The NAFCU Journal July - August 2017 - 7
The NAFCU Journal July - August 2017 - 8
The NAFCU Journal July - August 2017 - 9
The NAFCU Journal July - August 2017 - 10
The NAFCU Journal July - August 2017 - 11
The NAFCU Journal July - August 2017 - 12
The NAFCU Journal July - August 2017 - 13
The NAFCU Journal July - August 2017 - The Digital Download
The NAFCU Journal July - August 2017 - 15
The NAFCU Journal July - August 2017 - How Secure Is Your Credit Union?
The NAFCU Journal July - August 2017 - 17
The NAFCU Journal July - August 2017 - 18
The NAFCU Journal July - August 2017 - 19
The NAFCU Journal July - August 2017 - 20
The NAFCU Journal July - August 2017 - 21
The NAFCU Journal July - August 2017 - The Bank Secrecy Act
The NAFCU Journal July - August 2017 - 23
The NAFCU Journal July - August 2017 - 24
The NAFCU Journal July - August 2017 - 25
The NAFCU Journal July - August 2017 - 26
The NAFCU Journal July - August 2017 - 27
The NAFCU Journal July - August 2017 - 28
The NAFCU Journal July - August 2017 - 29
The NAFCU Journal July - August 2017 - 2017 Annual NAFCU Award Winners
The NAFCU Journal July - August 2017 - 31
The NAFCU Journal July - August 2017 - 32
The NAFCU Journal July - August 2017 - 33
The NAFCU Journal July - August 2017 - 34
The NAFCU Journal July - August 2017 - 35
The NAFCU Journal July - August 2017 - 36
The NAFCU Journal July - August 2017 - 2016 NAFCU Annual Report
The NAFCU Journal July - August 2017 - 38
The NAFCU Journal July - August 2017 - 39
The NAFCU Journal July - August 2017 - 40
The NAFCU Journal July - August 2017 - 41
The NAFCU Journal July - August 2017 - 42
The NAFCU Journal July - August 2017 - 43
The NAFCU Journal July - August 2017 - 44
The NAFCU Journal July - August 2017 - 45
The NAFCU Journal July - August 2017 - 46
The NAFCU Journal July - August 2017 - 47
The NAFCU Journal July - August 2017 - Getting to Know …
The NAFCU Journal July - August 2017 - 49
The NAFCU Journal July - August 2017 - Management Insight
The NAFCU Journal July - August 2017 - 51
The NAFCU Journal July - August 2017 - Compliance Central
The NAFCU Journal July - August 2017 - 53
The NAFCU Journal July - August 2017 - Inside NAFCU Services
The NAFCU Journal July - August 2017 - 55
The NAFCU Journal July - August 2017 - From the President’s Desk
The NAFCU Journal July - August 2017 - Cover3
The NAFCU Journal July - August 2017 - Cover4
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