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Eight former CU employees under prohibition orders

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ALEXANDRIA, Va. (8/13/09)--The National Credit Union Administration (NCUA) has issued orders prohibiting eight individuals from participating in the business of any federally insured financial institution. In one order, former First Delta FCU employee Nikita Brown was sentenced to 78 months in prison, five years of probation, and $1.46 million in restitution after she was convicted of bank fraud and embezzlement. Jacqueline Tribou and Robyn Mullen-Turner, who formerly served at Eastern Maine Medical Center FCU and GPM CU, respectively, will serve comparatively light sentences for theft. Former Prince Kuhio FCU manager Roselle Farias, who was also convicted of bank fraud, will serve a 16-month term and will pay over $96,000 in restitution. Another former manager, Gisela Rivera Rosado of Newark, N.J.-based La Casa FCU, will serve a six-month house arrest term, five years of probation, and will pay $120,000 in restitution for embezzlement. Jorge Fleitas, formerly of Louisville, Ky.'s Beacon Community CU, will serve two years in prison, three years of probation, and will pay over $19,000 in restitution. He was convicted of conspiracy to commit mail and bank fraud, as well as aggravated identity theft. Eve Hutchinson, formerly of New York’s Buffalo Fire Department FCU, will also serve a light sentence following her conviction on grand larceny charges, but will pay $72,000 in restitution. Former New Alliance FCU teller Susan Bender signed an injunction without admitting or denying fault. Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million.

Dodd urges Fed to extend CARD Act deadline for CUs

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WASHINGTON (8/13/09)--Working closely with the Connecticut Credit Union League, Senate Banking Committee Chairman Chris Dodd (D-Conn.) yesterday urged the Federal Reserve Board to provide relief to credit unions regarding the 21-day rule under the Credit Accountability, Responsibility and Disclosure (CARD) Act as it applies to open-end plans other than credit cards. In a letter to Federal Reserve Board Chairman Ben Bernanke, Sen. Dodd urged the Fed to allow credit unions “more time to come into compliance” for such open-end plans. Under the Act, creditors are required to provide periodic statements to all open-end plan borrowers 21-days before their payment due dates, effective Aug. 20. Credit unions have indicated they can comply with these provisions for credit cards, but many credit unions have indicated that meeting the requirements for all other open-end plans is horrendous, and may not be possible for some credit unions by the rapidly approaching Aug. 20 effective date. Sen. Dodd urged the Fed to extend the current compliance deadline for credit union open-end plans other than credit cards, stating that the existing compliance date has caused “legitimate implementation difficulties” for a credit union product that “was not the primary focus” of the CARD Act. Dodd said that while the main goal of the 21-day provision of the CARD Act is to “ensure” that financial firms provide consumers the necessary window to respond to their billing statements, the rule is causing particular problems for credit unions that offer multi-featured credit plans with sub-accounts. The effort was supported by the Credit Union National Association (CUNA). CUNA said it will continue to pursue relief for credit unions on the issue by urging policymakers to limit the scope of the 21-day rule to credit cards. Barring that, it is seeking more time for compliance with the 21-day provision for open-end plans other than credit cards. Also, CUNA has met and discussed this issue repeatedly with the Fed. Earlier this week, the Consumer Federation of America, working with CUNA, expressed its concerns over this portion of the CARD Act in letters to the Fed and to Dodd. Late last month CUNA President/CEO Dan Mica encouraged credit unions to communicate directly with the Fed regarding this matter. CUNA issued a memo to help member credit unions deal with compliance issues created by the 21-day rule.

Inside Washington (08/12/2009)

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* WASHINGTON (8/13/09)--The Federal Reserve Bank of Cleveland Tuesday released a study exploring the idea of separating systemic risk into three tiers. The first tier would include high-risk institutions--those whose failure would pose the biggest risk to the financial system. The institutions would include large interstate banks and multi-state insurance companies. They would be required to have strict reporting guidelines, stress tests, and additional capital to absorb losses. Tier two would include moderately complex financial institutions, such as large regional banks and insurance companies. The institutions would have periodic stress tests, additional reporting requirements and more rigorous supervision than they have today. Tier three would include non-complex institutions--those that fall outside of the systemic institution watchdogs’ purview because of their low probability that a failure or stress would cause problems in the financial system. The goal of the three-tiered system is to match the level of oversight and regulation needed for different kinds of institutions, the report said. The report was authored by James Thomson, a vice president in the Cleveland Fed’s Office of Policy Analysis ... * WASHINGTON (8/13/09)--The Treasury has sent a final piece of legislative language to Capitol Hill regarding over-the-counter (OTC) derivatives. The legislation will provide for the regulation and transparency of all OTC derivative transactions; have strong prudential and business conduct regulation of all OTC derivative dealers and other major participants in the derivative markets; and improve regulatory and enforcement tools to prevent manipulation, fraud and other abuse, the Treasury said. The language comes as the use of credit default swaps (CDS) and other OTC derivatives increases. The OTC and CDS markets have been largely unregulated. The risk can contribute to the collapse of major financial firms and trigger stress throughout the financial system, Treasury added ...

Compliance Challenge CARD Act 21-day provision

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WASHINGTON (8/13/09)--In this month’s Compliance Challenge, the Credit Union National Association (CUNA) addresses how credit unions can best comply with portions of the recently enacted CARD Act that require 21 days of advance notice for payments to all open-ended credit accounts. CUNA cannot suggest any single method of dealing with the 21-day requirement, but its recently-published memo does provide several options taken by some credit unions. Those options include changing due dates to establish a uniform payment due date, printing the current and following month's payment due dates on the account user's periodic statement, and retaining the existing due dates, but providing additional periodic statements. However, as CUNA has said in the memo, “every compliance option available to credit unions involves substantial costs and/or disruptions to business practices.” While changing due dates to establish a uniform payment due date would mirror how legislators and the Fed envisioned compliance would work for credit card accounts, such a change would require systemic changes for many credit unions and could particularly challenge larger credit unions that send out periodic statements in cycles throughout a given month. Printing current and future payment due dates on an account user's periodic statement would likely be the cheapest and easiest way to meet compliance requirements, but credit union members may need substantial education about these changes to avoid confusion. In addition, the Fed's staff believes this method may be contrary to the intent of the law and may in the future indicate in a more formal manner that this option is not compliant with the rule. Preserving existing due dates while adding additional periodic statements is another option, but could substantially increase a credit unions mailing and processing expenses. The Fed also has allowed some leeway for credit unions that cannot meet the required compliance deadline of Aug. 20 by providing a “transitional compliance option of including an insert or language” within periodic account statements. To see the full compliance challenge, use the resource link.

CUNA issues comment call on BSA amendments

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WASHINGTON (8/13/09)—The Credit Union National Association (CUNA) has issued a regulatory comment call on the Financial Crimes Enforcement Network’s (FinCEN) proposed amendments to the Bank Secrecy Act’s (BSA) money services business (MSB) provisions. The revisions clarify which entities are covered by the BSA regulations and update the MSB regulations and definitions to reflect past guidance and rulings, current business operations, evolving technologies, and emerging business lines. The revisions would also apply the rules of the BSA to some foreign-based MSBs with ties to the U.S. The proposed rule also seeks comment from the industry on stored value products. While the proposed rule does not make any substantive changes at this time, FinCEN is seeking comment from the industry on stored value products to assist with a future rulemaking. Comments are due to CUNA by Aug. 26. Comments solicited by FinCEN should be submitted by Sept. 9. To view the CUNA comment call, use the link.

NCUA closes Nevadas Community One FCU

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ALEXANDRIA, Va. (8/13/09)--The National Credit Union Administration on Tuesday announced that it has closed Las Vegas-based Community One FCU, citing the credit union’s “declining financial condition” as the reason for the closure. The $159 million assets Community One FCU is the fifth federal credit union to be liquidated this year. The 21,000 members of Community One FCU will now be served by Utah-based America First FCU, which currently holds $4.9 billion in assets and more than 495,000 members. America First currently has 88 branch locations. It is not known if America First will assume control of any of Community One’s existing branch locations.