Security programs, Bank Secrecy Act compliance and flood area loans were all high on the list of items the Credit Union National Association and National Association of Federally-Insured Credit Unions on Friday asked the National Credit Union Administration to review as part of its annual review of one-third of the regulations affecting CUs.
Both trade associations on Friday released their letters to the regulator detailing possible improvements, and letters from both CUNA and NAFCU focused on the labyrinth of rules related to Part 748, which requires a federally insured credit union to develop a written security program and to develop a Bank Secrecy Act compliance program.
According to Luke Martone, CUNA’s senior director of advocacy and counsel, “NCUA should work with Treasury and other regulators to support meaningful legislative and regulatory changes to minimize the costs and problems financial institutions encounter in meeting BSA/AML requirements.”
Michael Emancipator, NAFCU’s senior regulatory affairs counsel, said in his letter to the regulator BSA and implementing regulations impose “significant burden and cost” on credit unions.
“Accordingly, NAFCU encourages NCUA to coordinate with the Financial Crimes Enforcement Network (FinCEN) in ensuring sensible regulation and exams are tailored to actual risks. Such coordinated effort will ensure that the resources and personnel credit unions devote to BSA-related regulatory compliance are allocated accordingly,” Emancipator wrote.
Among the issues both CUNA and NAFCU asked NCUA to address were what the trades said was a focus by examiners on technicalities rather than the spirit of the rule, which they asserted was to aid in law enforcement efforts in stopping money laundering and/or terrorist financing. Both trades complained about an atmosphere of “zero tolerance” related to the filing of Suspicious Activity Reports and/or Currency Transaction Reports.
CUNA’s Martone suggested NCUA needs to address the “redundancies, unnecessary burdens and opportunities for efficiencies” within the BSA/AML statutory framework. In particular, he said CUNA supports changes to (1) minimize the duplication of the same or similar information; (2) provide additional flexibility based on the reporting institution type or level of transactions; (3) curtail the continually enhanced customer due diligence requirements; (4) increase the currency transaction reporting threshold; (5) reduce and simplify the reporting requirements of Suspicious Activity Reports that have limited usefulness to law enforcement; and (6) allow for greater regulatory and examination consistency among regulators, including the NCUA and state credit union regulators, in order to provide greater uniformity of interpretations of BSA requirements and guidance and to minimize regulatory overlap.
Martone added it would be helpful to the industry if the SAR and CTR forms were combined into one form and submitted to a single place.
Flood area loans, other regulations
Both NAFCU and CUNA weighed in on NCUA’s review of Part 760: Loans in Areas Having Special Flood Hazards.
NAFCU’s Emancipator said NCUA should provide more flexibility with respect to the delivery and timing of required notices related to interagency flood insurance requirements for loans secured by buildings or mobile homes in areas having special flood hazards.
Additionally, he wrote, it would be “beneficial” for NCUA to provide a sample notice of an "acknowledgement of receipt" form, adding to the list of samples that the agency already provides.
CUNA’s Martone said the November 2016 proposed rule related to Part 760 would eliminate a safe harbor included in an October 2013 proposal in favor of a compliance aid. He said CUNA believes the safe harbor included in the October 2013 proposal “is most appropriate.”
“The safe harbor would have eliminated any burden on lenders of determining the suitability of private flood insurance policies, and would have appropriately placed the burden on insurance companies, which are most familiar with the details of their private insurance policies.”
Martone concluded his letter by stating CUNA believes the process for seeking comments on regulations included in NCUA’s Regulatory Review “could be improved.” For example, he wrote, some of the rules included for review may already be the subject of proposed changes or recent modifications.
“In such instances, it is unclear the extent to which further amendments to those regulations will be contemplated by the agency,” Martone said.
In addition to offering recommendations for improvements to Part 748 and Part 760, NAFCU’s Emancipator covered the following:
· Part 749, Records Preservation: “Maintaining records indefinitely is an administrative burden that exceeds the reasonable intentions of record retention rules. Accordingly, NAFCU recommends that record retention requirements align with statutes of limitations, varying based on product and information type.”
· Part 791: Rules of NCUA Board Procedure: Related to the conduct of the Board's rulemaking process, “NAFCU recommends that NCUA publish solicited comments on regulations.gov. NAFCU believes that stakeholder comments are a fundamental component of the rulemaking process, and that comments received and considered by the Board should be a part of the rulemaking's historical record.”
· Part 792: Requests for Information under the Freedom of Information Act and Privacy Act: NAFCU urges NCUA to “exceed minimum statutory standards and zealously apply an approach to information-sharing that would surpass the Act’s goal of adopting a ‘presumption of openness.’”
· 2016 Annual Review Report: “Related to the spirit of the annual review process, we encourage NCUA to publish the results from the 2016 regulatory review.”
· Codify IRPS: Related to codified regulations, IRPS is official interpretation of the Federal Credit Union Act, which NAFCU noted may or not be subject to the formal rulemaking process. “NAFCU recommends that NCUA start codifying IRPS into a more traditional regulatory framework. In the alternative, NAFCU asks for NCUA to include IRPS in the next annual review process.”
· Standardized publication of Legal Opinion Letters: Although NCUA's legal opinion letters are not officially regulations, NAFCU noted their application of a rule to a specific set of facts is “very helpful” for credit unions as they seek to interpret regulations. However, NCUA currently publishes legal opinion letters only on its website. “NAFCU urges NCUA to implement a strategy by which the agency actively publishes and notifies the industry when a legal opinion letter is posted, much like it currently does when publishing prohibition or conservatorship notices.”