Compliance Blog

Posted by Anthony Demangone

Happy Friday, everyone!  Here's some info to help start the weekend.

Backup Witholding.  The IRS has issued Announcement 2010-41  regarding new procedures for backup withholding.  The announcement applies only when a credit union receives a second notice from the IRS that a member has provided an incorrect taxpayer identification number (TIN) or name.  Under IRS rules, when the second notice is received the credit union must obtain validation of the TIN from the Social Security Administration (SSA) or the IRS, but to do that, the member must authorize the SSA to send the now discontinued Form SSA-7028 to the credit union.  The announcement outlines how the credit union needs to notify the member on providing the credit union with validation of the SSN.

BSA Civil Money Penalty.  Yesterday, FinCEN announced a $1 million civil money penalty against Pamrapo Savings.

Pamrapo’s lack of internal controls combined with unqualified BSA compliance personnel, relatively non-existent training and deficient independent testing resulted in a wholly ineffective BSA compliance program which, in turn, resulted in the failure to file a substantial number of currency transaction and suspicious activity reports in an accurate and timely manner. Pamrapo Savings Bank, without admitting or denying the allegations, consented to payment of the civil money penalty.

So, yes, BSA is still an issue for regulators.  Did I mention that NAFCU will host a BSA-related webcast on July 14th?  (Shameless, shameless plug, I know.)

Fiduciary Duties.   NAFCU recently sent this comment letter to NCUA on the fiduciary duties proposal.  I like reading comment letters, because they can highlight issues that you may have missed when reading a proposal.   If you look at NCUA's proposal rules homepage, they have links where you can read the comments.

Speaking of fiduciary duties, many folks have been asking if NAFCU's online training program satisfies the proposal's requirements on board training.  Since I created the training program, I tend to get those questions. Here's my take:

1. First, the proposal is just a proposal. We won't know what the final rule requires until it is issued.
2. Assuming that the final rule will mirror the proposal (which is a huge assumption), there appears to be two major areas where directors may need training.  First, the proposal appears to require that, within 90 days of joining the board, directors need to have training on financial issues so that they can read a financial statement and raise appropriate questions.  Second, directors have to be able to ensure that the credit union runs its affairs within all applicable laws and regulations.  Both of these areas likely will need training.

Does our training meet these requirements?  That's a tough call, because I'm not the final judge.  We do have an ALM session that addresses some aspects of financial reports.  We do talk about how credit unions are regulated and examined.  And we address BSA.  But ultimately, you'll have to ensure that the training program you select meets your needs.  In other words, do your due diligence.  With that in mind, take a look of the outline of our training program for directors and officials.  And here is the training homepage, which includes a demo.

Flood.  The FDIC recently issued more than $16,000 in civil money penalties against two different banks for alleged flood insurance violations.  This really worries me, because banks get clobbered for flood insurance deficiencies all the time. Don't believe me?  Look at this page at BankersOnline to see the list of flood CMPs.  More than 25 banks have received civil money penalties this year. But for some reason, credit unions do not get these CMPs, even though the requirements are the same.  This keeps me up at night.  With that in mind, we'll have someone at this year's NAFCU Compliance Seminar to address flood insurance issues. Here's a description of the session.

Stemming the Tide of Flood Compliance Issues
This presentation will provide insight into credit unions’ compliance obligations under the federal flood regulations with a focus on changing requirements under recently revised regulatory guidance. You will learn about the regulators’ “Questions and Answers Regarding Flood Insurance”, challenges related to resolving flood determination discrepancies, and NFIP reform and how it impacts credit unions and their members.  Opportunities for asking questions will be provided to allow you to bring your compliance issues to the table. Presented by Scott Giberson, CFM, Compliance Manager, CoreLogic Flood Services.

OK, that's enough for today.  Enjoy your weekend, everyone!