Garbage In, Garbage Out: Credit Union Examiners Insist on Data Validation Audits

BY CINDY WILLIAMS

The increasing integration of technology into credit unions’ compliance efforts is opening CUs to greater scrutiny by examiners. What exactly are they looking for? CUB’s compliance expert breaks it all down to make IT-centric questioning during exams less stressful and intimidating for your staff.

If you rely on software to comply with Bank Secrecy Act, Anti Money Laundering or Office of Foreign Assets Control regulations, BSA/AML examiners are likely to want a peek under the hood of your technology. This demand could challenge credit union staff who are not accustomed to answering IT-centric questions during exams.

Credit unions use a large and growing number of tech solutions, such as Verifin or Bankers Toolbox, to apply risk scores to members and to monitor transactions for suspicious activity. Tirelessly scanning transactions for volume and velocity, unusual wire activity, even red flags like common addresses between members, this highly sophisticated technology doesn’t miss much.

However, the accuracy and effectiveness of these solutions and the outcomes they produce are paramount to a financial institution’s compliance with regulations. That is why examiners are increasingly asking to see evidence of data validation audits and/or regular software reviews.

Why Now?

Examiner attention to these practices has been around for many years in the big-bank world, but it is beginning to pick up steam among credit union examiners as well. This is because more of the credit unions they examine are integrating technology into their compliance effort.

Much of the BSA/AML/OFAC software available to credit unions today is more than a decade old. At one time, it was deployed by only the largest banks and credit unions. Over time, however, the technology has trickled down to more community-based financial institutions, many of which have a good three to five years of experience with the technology under their belts – long enough to have become proficient with its use.


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