In our whitepaper Think You Know Audits?, we talked about the NCUA’s 2017 Supervisory Priorities. One of those priorities is BSA compliance, with specific focus on credit unions’ relationships with MSBs. The 2017 NCUA Supervisory Priorities, Letter No. 17-CU-01, references the NCUA Supervisory Letter No 14-05, Money Services Businesses, which includes three sections – I. Background, II. Exam Procedures, and III. Additional Guidance Relevant to Money Services Businesses. This blog will highlight a key point from each section, and discuss how PolicyWorks’ BSA Independent Audit can help your credit union stay in compliance.
Section 1 – Background – Risk Mitigation Factors
MSBs can provide a valuable service to the community, and can be a profitable account for a credit union, however, MSBs can pose additional risk to the credit union. It’s important to ensure your credit union is aware of the risks, and implements adequate controls to mitigate that risk, such as:
- Proper identification of MSB relationships
- Adequate assessment of potential risks
- Adequate understanding of the business model and activity of the MSB
- Adequate and ongoing due diligence relative to the risk assessed
- Adequate and ongoing suspicious activity monitoring
- Adequate staffing, expertise, and resources
As part of PolicyWorks’ BSA Independent Audit, we will look at your CIP procedures, BSA risk assessment, and training program. We’ll also look at your reports and due diligence controls, and we’ll perform transaction testing to ensure your controls are working.
Section II – Exam Procedures
Some credit unions’ policies do not allow MSBs into their membership, while others do. The account opening procedures are a critical first step in helping identify MSBs, but ongoing due diligence is just as important, if not more so. Some key indicators that a business might be an MSB are:
- Large cash transactions not commensurate with expected activity of account or business
- High volume of third-party checks when not commensurate with expected activity of account or business
- High volume of wire transfers not commensurate with expected activity of account or business
PolicyWorks will verify your written procedures are followed, and while performing our testing, we’ll look for activity that might indicate an MSBs exists in your membership.
Section III – Additional Guidance Relevant to Money Services Businesses
The NCUA provides a good list of resources that the credit union’s BSA Officer should be familiar with, including:
- NCUA Letter to Credit Unions, Supervisory Focus for 2014 (LCU 14-CU-02)
- Interagency Interpretive Guidance on Providing Banking Services to Money Services Businesses Operating in the United States, issued April 26, 2005
- Bank Secrecy Act/Anti-Money Laundering Examination Manual, Federal Financial Institutions Examination Council (FFIEC)
- Nonbank Financial Institutions Overview
- Nonbank Financial Institutions Examination Procedures
- Bank Secrecy Act, 31 CFR 1000
PolicyWorks utilizes the FFIEC Bank Secrecy Act/Anti-Money Laundering Examination Manual when we perform your BSA Independent Audit. This ensures the credit union’s BSA Program gets the level of scrutiny it deserves.
Stay tuned for a future blog about MLA and SCRA, another NCUA Supervisory Priority for consumer compliance.