ALEXANDRIA, Va. (3/7/12)--Although the National Credit Union Administration's (NCUA's) Office of Inspector General (OIG) noted that the low level of anticipated losses from the failure of Vensure FCU doesn't meet the threshold to require an OIG material loss review (MLR), circumstances surrounding the NCUA's conservatorship of the small credit union were sufficiently "unusual in nature" to prompt such a review.
The NCUA last July closed the Mesa, Ariz., Region V credit union, which had started out as a New York, Region I, credit union. At the time of liquidation, Vensure had 140 members and $8.1 million in assets. The OIG report noted an estimated $39,000 loss to the National Credit Union Share Insurance Fund.
The credit union had been taken into conservatorship by the NCUA on April 15, with the agency claiming that the credit union failed to properly diversify its business.
It was, in fact, that lack of diversity and the NCUA's notation of it and supervision of it that, in part, spurred the OIG report
"We determined Region I examiners failed to readily identify or adequately pursue the nature of Vensure's primary source of income, ACH-related fee activity, which was later determined to be tied to a criminal violation of the (Unlawful Internet Gambling Enforcement Act) UIGEA.
"This occurred despite Region I examiners conducting an on-site, risk-focused supervisory contact specifically focused on Vensure's FedWire controls and ACH activities and procedures," the MLR (OIG-12-05), dated Feb. 29, said.
The OIG report said examiners explained they did not identify the nature and scope of Vensure's fee activity because their primary focus was getting the credit union "back on track" through the identification of issues such as appropriate record keeping, written policies, a business plan, and appropriate operating procedures.
"As a result, we believe Region I examiners not only missed uncovering what turned out to be an elaborate money laundering scheme tied to illegal internet gambling involving several Vensure members, but also could have prevented or mitigated the current and potential loss to the NCUSIF," the report said.
In September 2011, the U.S. Department of Justice charged the owners and executives of an online gambling site, which deposited funds into Vensure, with paying themselves $444 million since 2007 while defrauding players in what the government alleged was a massive Ponzi scheme.
Vensure was one of 16 financial institutions that allegedly held funds tied to online gambling sites under investigation by the Federal Bureau of Investigation. The credit union challenged the NCUA's conservatorship, but the challenge was rejected in federal court.