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AML … A Growing Concern for Credit Unions

BY KENNETH J. SOLES

The widening sphere of credit union membership should represent opportunity for CUs, but it’s not without its inherent risks. Keep reading to find out how to protect your credit union from the anti-money laundering schemes that are stemming from open enrollment and association memberships.

Along with the opportunity of ever-expanding fields of membership the credit union industry is able to access within the current regulatory climate comes a corresponding increase in risk with regard to money laundering concerns. Traditionally, credit unions had been somewhat insulated from this risk due to their knowledge of where their members originated and their tight control over members’ transactional activities. Now with “open” enrollment and “association memberships,” almost anyone can avail themselves of the products and services offered by a credit union.

Today’s expanded business banking capabilities and open markets, however, also provide an opportunity for the credit union to become a prime target for nefarious monetary practices. As such, it is imperative that credit unions exercise increased diligence in this arena and implement sophisticated automation to assist in the management of monitoring and tracking of both cash and electronic transfers.

Regardless of the platform employed, there are five key data elements to be monitored when it comes to anti-money laundering (AML) governance. These are:

                        Member Information

                        Geography

                        Products and Services

                        CU Data History

                        Regulatory Filings

Each of these data components must be tightly managed and electronically stored to enable the credit union to monitor for unusual patterns or suspicious activities. With regard to new members, credit unions need to monitor who these new relationships are and how they arrived at the credit union. An evaluation process (and corresponding Office of Foreign Assets Control check) must be formulated and implemented to assess if the new prospective member is a high risk member or a politically exposed person (PEP). Account origination systems must be positioned to perform these evaluations, and formal documentation should be retained as evidence of such processes.

This content is for CU BUSINESS eMagazine + WEB ACESS and THE TEAM BUILDER (GROUP SUBSCRIPTION) members only.
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