WASHINGTON—CUNA has expressed concern over a small South Florida credit union that was recently assessed a $300,000 fine by the U.S. Treasury Department's Financial Crimes Enforcement Network (FinCEN) for ignoring reporting and record-keeping requirements under the Bank Secrecy Act (BSA) between 2009 and 2014.
Eric Richard, CUNA's general counsel, commented on the North Dade issue: "This is an unusual situation in which a very small financial institution made poor decisions, and must now pay the price."
Based in Miami Gardens, Fla., the North Dade Community Development Federal Credit Union, with only $3.6 million in assets, generated $1.01 billion in outgoing wires and $984 million in remotely captured deposits last calendar year.
FinCEN explained that North Dade had contracted with a third-party vendor and money services business (MSB) to provide services and sub-accounts to 56 MSBs that were located in "high-risk" jurisdictions - namely, Central America, Mexico and the Middle East - far from its South Florida field of membership (FOM). These accounts alone represented 90% of North Dade's annual revenues, FinCEN noted.
Moreover, FinCEN warned, the credit union's anti-money laundering (AML) failures had exposed the U.S. financial system to "significant opportunities for money laundering and terrorist financing from known high-risk jurisdictions."
With respect to violations of the BSA program, FinCEN reported, the North Dade FCU failed to comply with Section 314(a) of the USA PATRIOT Act, which calls for financial institutions to detect possible links to any illegal and/or suspicious activity, including money laundering and even terrorism, among its membership.
"When a small institution opens its doors to the world, takes on greater risks than it can manage, and puts profits before AML controls, bad actors are bound to take advantage," said FinCEN Director Jennifer Shasky Calvery in a statement. "This case raises pretty obvious questions that no one seems to have asked. Why would MSBs located all over the world choose a small Florida credit union to conduct close to $2 billion in transactions? Credit unions pride themselves on close and low-risk relationships with known neighborhood customers.
However, North Dade welcomed customers far beyond its field of membership, without adequate policies and procedures to ensure AML compliance."
CUNA's Richard added in a statement that credit unions as an industry "spend a tremendous amount of time and resources" complying with the Bank Secrecy Act; and that "they are interested in understanding why this problem was not spotted early on by their federal regulator, the National Credit Union Administration. Credit unions annually fund the federal agency so that it has a strong contingent of examiners to prevent things like this; yet somehow the most obvious problems are missed."
In response to Richard's criticism, John Fairbanks, spokesman for NCUA, stated: "NCUA is continually working to make its examination process keep pace with the industry, including shifting resources to areas of greatest potential loss and putting more specialist examiners in the field."
Separately, with regard to North Dade's failure to comply with 314(a) program, Calvery of FinCEN expressed its "great concern" that the credit union failed to even review the 314(a) requests it received.
"These are time-sensitive requests that, by their very nature, are intended to further criminal investigations into significant money laundering and terrorist financing activities," Calvery said.
The government agency further stated that North Dade couldn't "adequately monitor, detect, or report significant suspicious transactions and other activities taking place through the credit union," including money laundering and drug trafficking, adding that when the credit union did bother to file suspicious activity reports, they were often "late and insufficient."
The fine levied against North Dade FCU comes more than a year after the NCUA issued a cease-and-desist order against the credit union for similar reporting violations.
On Sept. 9, 2013, NCUA stated that the North Dade officials had consented to the order, which required, among other things, that the credit union cease transacting all business activity for MSBs not located within its geographic field of membership; and for North Dade to ensure the completion of bank secrecy, anti-money laundering, and foreign assets control-testing.
According to the latest Call Report filed by North Dade FCU, the $300,000 fine charged by FinCEN amounted to nearly one-half of the CU's net worth ($616,641) as of the third quarter of 2014. North Dade has also posted a loss of $298,615 through the first nine months of this year (excluding the FinCEN fine), after posting net income of $384,290 in calendar 2013.
North Dade FCU could not be reached for comment at press time.