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FFIEC issues revised BSAAML exam manual

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WASHINGTON (4/30/10)--The Federal Financial Institutions Examination Council (FFIEC) has issued a revised version of its Bank Secrecy Act/Anti-Money Laundering (BSA/AML) Examination Manual. The National Credit Union Administration, the Federal Reserve, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, and the State Liaison Committee, along with the Financial Crimes Enforcement Network, collaborated on the revised manual. The revised manual clarifies supervisory expectations provided since the August 2007 update. The revisions are reflected in the table of contents. The Credit Union National Association (CUNA) has recommended that credit unions pay special attention to updates made to the core examination overview/procedures discussion that deal with basic BSA concepts, as well as the appendices. Those sections have been “streamlined and reorganized” to be “more logical,” according to a FinCEN release. Credit unions should also review the updated discussion in the expanded overview/procedures, which address specialized banking activities, where appropriate, CUNA added. Specifically, sections on currency transaction reporting exemptions, fund transfers, suspicious activity reporting (SAR), and automated clearing house transactions, among others, were amended. The revisions now contain an “enhanced” discussion of “methods to identify, research, and report suspicious activity.” The SAR section has also been reorganized “to reflect current supervisory expectations” and is now more user friendly. For the FFIEC release, use the resource link.

NACHA simplifies reworks operating rules

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SEATTLE, Wash. (4/30/10)--NACHA--the Electronic Payments Association--earlier this week said that it has substantially revised and reorganized its operating rules. NACHA has reorganized its rules “around the rights and responsibilities of participants” in the electronic payment network, “making them more navigable by participants.” The rules have also been rewritten in “clear, understandable, and consistent language,” NACHA added. Overall, NACHA said, the rules are easier to understand and to comply with. NACHA President/CEO Janet Estep said that the association’s goal “is to make the rules more easily understood and the corresponding information easier to find.” According to NACHA, the rules also "explicitly recognize that the originating financial institutions are the entry points into the ACH Network for corporate users and third parties, and that the financial institutions are responsible for those parties' compliance with the Rules." This new version of the NACHA Operating Rules will go into effect on Jan. 1, 2011. NACHA plans to follow up on other portions of its rules simplification initiative later in the year by undertaking a “comprehensive review and overhaul” of its operating guidelines and by enhancing its ACH Rules Online website. For the NACHA release, use the resource link.

Inside Washington (04/29/2010)

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* WASHINGTON (4/30/10)--National Credit Union Administration Chairman Debbie Matz (pictured) visited a student-run credit union branch at T.C. Williams High School in Alexandria, Va., Wednesday. The credit union is open five days a week during the school year and has more than 400 student members. CommonWealth One FCU, Alexandria, has a relationship with seven area schools, including T.C. Williams. “This student-run branch was impressive not only because it gives high school students a firsthand opportunity to manage their own credit union, but also because of practical money-management experience it provides,” Matz said. “Financial literacy is not something to be put on the shelf and read in a classroom setting once or twice a week. It’s an everyday, living activity, and the efforts that the credit union industry is putting into basic financial education are bound to pay dividends far into our future,” Matz said. (Photo provided by the National Credit Union Administration) ... * WASHINGTON (4/30/10)--Rep. Darrell Issa (R-Calif.) is questioning the Federal Deposit Insurance Corp. (FDIC) about why it waited so long to close a bank owned by the family of a U.S. Senate candidate. Issa is referring to the scrutiny involving the closure of Broadway Bank, which cost the Deposit Insurance Fund $394.3 million. Issa said regulators knew long ago the bank had problems. Broadway is a community bank owned by the family of Illinois State Treasurer Alexi Giannoulias, a Democratic candidate for the Senate ... * WASHINGTON (4/30/10)--A Supreme Court ruling this week could help banks fight consumer class-action suits on overdraft fees and other practices, said American Banker (April 29). The court ruled 5-3 Tuesday in Stolt-Nielsen SA v. Animalfeeds International Corp. that Animalfeeds, a shipping firm, was not obliged to face a class arbitration with commercial customers even though it had individual arbitration agreements with them. Some retail finance agreements contain clauses in which customers agree to give up the right to pursue class actions, Banker said. If banks persuade courts that the waivers in consumer contracts are valid, overdraft claims could be pursued only by individuals. The small dollar amounts per person could mean that it’s unlikely many would pursue arbitration. Many suits have recently been filed by banking customers who say they were involuntarily enrolled in predatory overdraft protection plans, the publication said. ... * WASHINGTON (4/30/10)--President Barack Obama nominated Janet L. Yellen Thursday for vice chair of the Federal Reserve Board (The New York Times April 28). Yellen, a former Fed governor and macroeconomist, would replace Donald Kohn. She currently is president of the Federal Reserve Bank of San Francisco. Obama also will nominate Peter A. Diamond, economist at the Massachusetts Institute of Technology, and Sarah Bloom Raskin, Maryland commissioner of financial regulation, to fill two remaining seats on the board of governors ...

NCUA proposes payday loan alternative for CUs

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ALEXANDRIA, Va. (4/30/10)--The number of federal credit unions that provide payday loan alternatives to their membership may increase if the National Credit Union Administration’s (NCUA) proposed changes to its general lending rules are adopted.
Click to view larger imageNCUA Chairman Debbie Matz discusses the short-term loan proposal with NCUA staff
The NCUA proposal, which was approved for 60 days' public comment at Thursday’s open board meeting, would allow credit unions to charge a higher interest rate on short-term, small dollar loans. However, those loans, which would be capped at a maximum interest rate of 10% above the NCUA’s loan ceiling, or 28% based on the current ceiling, would also have a maximum amount of $1,000. The minimum amount for these payday alternative loans would be $200. Loans will not roll over. The NCUA indicated that the proposal is consistent with the Federal Credit Union Act, which allows the agency to permit loan rates above 15% under certain conditions and does not require it to set the same ceiling for all types of federal credit union loans. Members would need to pay off their loans within one to six months, and may take out only one loan from their credit union at a time. Also, federal credit unions would not be authorized to make more than three such loans to a member in any rolling six-month period. Federal credit unions would not be required to run credit checks on their members, but should set loan amounts and terms that are appropriate for each member’s financial circumstance. Under the NCUA proposal, credit unions would be permitted to charge a $20 fee per loan to cover costs, and may also impose late or default fees “that comply with NCUA’s credit practices rule.” Credit unions “should be careful that late fees do not exacerbate a borrower’s financial situation,” the NCUA release added. NCUA Chairman Debbie Matz said that comments on the proposal should focus on safety and soundness concerns, and requested that credit unions currently offering these types of loans provide input on whatever difficulties they may have had. The application fees and interest associated with these loans, according to NCUA staff attorney Justin Anderson, are designed to merely cover the cost of providing these loans. NCUA board member Michael Fryzel added that these are “break even” loans, and are more of a service offered to members than a profit-based proposition. The NCUA also agreed to continue to permit corporate credit unions to use the capital levels disclosed on their Nov. 30, 2008, call reports when determining “their compliance with certain capital-based requirements and limitations” in the NCUA’s corporate guidelines. NCUA board member Gigi Hyland said that this continuation is “essential” to keep the credit union system stable as the NCUA works to resolve some outstanding issues within the corporates. The NCUA's action will extend until one year after the effective date of the new corporate regulation, which should be made final by October. Under the current corporate rule, a number of limitations on corporates are tied to the corporate's capital level. These include earnings retention, concentration limits, lending limits, borrowing limits and others. The extension of the waiver will permit corporates to comply with those limits based on the capital levels they reported in late fall of 2008. The NCUA's Office of Corporate Credit Unions will be able to modify the waiver for any particular corporate, based on safety and soundness issues. NCUA Chief Financial Officer Mary Ann Woodson also addressed the credit union system in her monthly report and updated the NCUA on the status of its National Credit Union Share Insurance Fund. While many statistics in the report remained steady when compared with recent reports, Woodson noted slight increases in the number of CAMEL Code 3, 4 and 5 credit unions, with the percentage of total insured shares held by those credit unions decreasing slightly since the start of 2010. There are currently 349 CAMEL 4 and 5 credit unions, which represent 5.68% of insured shares. NCUA staff also noted that there are currently 1,688 CAMEL 3 credit unions, which represent 13.86% of insured shares. Combined, insured shares in CAMEL 3, 4, and 5 credit unions represent approximately 18.5% of insured shares.