(April 16, 2021) Mark your calendars for a series of education events coming up in the next couple of months, particularly a three-day virtual event in June focusing on marijuana and hemp developments.
On June 9-11, NASCUS sponsors its Marijuana and Hemp eSchool, a three-day virtual school that looks at recent regulatory updates, how businesses are evolving in the sector, what financial institutions should be considering in developing their own cannabis and hemp banking programs, and business payments (among other things).
The e-school is led by Deirdra O’Gorman, founder and principal of DX Consulting. Since 2015, she has also served as CEO of The Fourth Corner Credit Union (4CCU), the first credit union chartered in more than 10 years in the state of Colorado.
Next month, May 19 and 26, NASCUS sponsors its HR webinar series, featuring Diane Pape Reed, president of CUDoctor, a full-service consultancy and training company. She is also co-founder of the annual CUNA Human Resources Compliance Certification School and was VP of Sales and Administration for a mid-sized Credit Union for 10+ years.
In the May 19 session of the HR series, Reed will focus on building team trust and managing remote employees. In the May 26 session, she will highlight common remote management missteps and how managers can avoid them.
Both virtual sessions are one-hour long and begin at 2 p.m. ET.
For information on registration and complete agendas for all of the programs, see the links below.
LINKS:
HR Webinar series: Managing Remotely – Time to De-Stress and Establish Trust (May 19)
NASCUS Conferences and Meetings, 2021
(April 16, 2021) In a development Friday morning, the NCUA Board announced it had adopted an interim final rule (IFR) by notation vote that reduces the earnings retention requirement for credit unions classified as adequately capitalized, and permitting an undercapitalized credit union to submit a streamlined net worth restoration plan if it becomes undercapitalized predominantly because of share growth during the coronavirus crisis.
The board adopted the IFR – which is substantially similar to a rule adopted last May but that lapsed at year-end 2020 – in a notation vote. The IFR is also the subject of a briefing for the board at its regular monthly meeting Thursday (April 22). That same meeting will also include a board briefing on cybersecurity.
The IFR takes effect immediately; the vote also keeps the temporary measures in place until March 31, 2022.
Last May, the board issued an IFR that waived the earnings retention requirement for “adequately capitalized” credit unions and eased net worth restoration plan requirements for some “undercapitalized” credit unions. That rule, approved with an expiration date of Dec. 31, 2020, was intended to help ensure that federally insured credit unions (FICUs) remained operational and liquid during the COVID-19 crisis.
NCUA called this week’s rule “substantially similar” to the regulation adopted nearly a year ago. The agency said that, due to the pandemic’s continued financial and economic disruptions, it was necessary to reintroduce the two temporary relief measures.
Under the first provision of the IFR (reducing the earnings retention requirement for credit unions classified as adequately capitalized), NCUA said those credit unions unable to meet the requirement will not have to submit a written application requesting approval to decrease their earnings retention amount.
“However, if a credit union either poses an undue risk to the National Credit Union Share Insurance Fund or exhibits material safety and soundness concerns, the appropriate NCUA Regional Director may require the credit union to submit an earnings transfer waiver request,” the agency said.
Under the second provision (permitting an undercapitalized credit union to submit a streamlined net worth restoration plan if it becomes undercapitalized predominantly because of share growth due to the crisis), if a credit union becomes less than adequately capitalized for reasons other than share growth, it must still submit a net worth restoration plan under the current requirements in NCUA’s regulations.
In a statement, NCUA Board Chairman Todd Harper said the changes reflect the impact of the influx of savings by members into their credit unions from stimulus payments and other sources. “The latest round of stimulus spending has further expanded credit unions’ balance sheets,” Harper said. “As a result, many well-run credit unions with positive earnings now have lower net worth ratios. Given the continued uncertainty with the pandemic and share growth many credit unions are seeing, this targeted, tailored and temporary rule will provide critical relief so eligible credit unions can focus their limited resources on their members’ needs instead of planning for earnings transfers and developing detailed net worth restoration plans.”
Board Vice Chairman Kyle Hauptman characterized the rule as a method for allowing credit unions to stay focused on serving members. Board Member Rodney Hood observed that “while this temporary relief wasn’t widely utilized last year when it expired, it now appears we need this tool now for credit unions.”
The IFR has a 60-day comment period, ending on June 18.
LINKS:
Temporary Regulatory Relief in Response to COVID-19 – Prompt Corrective Action
NCUA Board April 22 open meeting agenda
(April 16, 2021) NASCUS President and CEO Lucy Ito was on the virtual road this week meeting with First Credit Union of Chandler, Ariz. Calling itself Arizona’s “original” credit union (serving since 1929), First CU held $590 million in assets, and counted nearly 42,000 members, at year-end 2020.
(April 16, 2021) NCUA and other federal agencies are seeking feedback on how well four-year-old guidance for complying with anti-money laundering and Bank Secrecy Act (AML/BSA) requirements is working for them, according to a request for information (RFI) issued late last week.
NCUA joined with the federal banking agencies, as well as Treasury’s Financial Crimes Enforcement Network (FinCEN) and the Office of Foreign Assets Control (OFAC) in issuing the RFI. It seeks comment on the principles outlined in the 2017 interagency “Supervisory Guidance on Model Risk Management.” Comments are due June 11 (following a 60-day comment period).
According to the RFI, it is aimed at enhancing the agencies’ understanding of institutions’ practices with respect to BSA/AML and OFAC compliance and determining whether additional explanation or clarification may increase transparency, effectiveness, or efficiency.
Even though the banking agencies’ model risk management guidance (MRMG) does not apply to credit unions, the RFI nonetheless seeks input from the perspective of credit unions as well as banks.
The OCC, Fed Board, and FDIC, in consultation with NCUA and FinCEN, also issued a statement late last week to clarify that the risk management principles discussed in the model risk management guidance (MRMG) are appropriate considerations in the context of the BSA/AML statutory and regulatory requirements.
In an unrelated, but topical, development this week, the U.S. Justice Department announced the indictment of two individuals who used a now-defunct New York credit union (and others) as their cover in helping the individuals (now defendants under the federal indictment) allegedly facilitate more than $1 billion in high-risk transactions that were carried out without AML controls. In a release, the DOJ said the two defendants were charged with failure to maintain an anti-money laundering program, failure to file suspicious activity reports (SARs), and operation of an unlicensed money transmitting business (MSB).
According to the DOJ, the former New York State Employees Federal Credit Union (NYSEFCU) of New York, N.Y. – a $2 million credit union liquidated in 2017 by NCUA, citing (among other things) AML/BSA deficiencies — allowed the defendants to conduct high-risk transactions through the credit union during 2014-16. The DOJ said the defendants allegedly caused the transfer of more than $1 billion in high-risk transactions, including hundreds of millions of dollars originating from foreign jurisdictions, through NYSEFCU and other entities.
The law enforcement agency said that, contrary to their representations of being trained and well-versed in AML practices, the defendants “willfully failed to implement and maintain the requisite AML programs or conduct oversight required to detect, identify, and report suspicious transactions.
“This caused, among other things, the NYSEFCU to process more than a billion dollars in high-risk transactions,” during the individuals’ relationship with the credit union, “without ever filing a single Suspicious Activity Report, as required by law,” the DOJ said.
NASCUS, in conjunction with CUNA, each year sponsors a BSA/AML Certification School, widely viewed as the premier event of its kind for credit unions in the subject area. The event is typically held in the fall; last year’s event, in the wake of the coronavirus crisis, was held as a virtual “e-school.” The annual program helps attendees boost their status as reliable, confident authorities on all things relevant to the Bank Secrecy Act (BSA). It also offers them an opportunity to earn or recertify their BSA Compliance Specialist (BSACS) designation.
(April 16, 2021) A request for information (RFI) about how credit unions and banks use artificial intelligence (AI) in their activities, including fraud prevention, personalization of customer services, credit underwriting, and more is summarized by NASCUS and posted on the website this week.
The summary is available to members only.
On March 29, the CFPB – along with NCUA and federal banking agencies – issued the RFI seeking information from a broad audience that includes credit unions and other financial institutions, but also trade associations, consumer groups, and other stakeholders. The agencies said they want to better understand financial institutions’ use of AI, including machine learning; appropriate governance, risk management, and controls over AI; challenges in developing, adopting, and managing AI; and whether clarifications are needed.
Regarding those clarifications, CFPB and the other agencies said they want to learn whether any are necessary from the agencies that would be helpful for financial institutions’ use of AI “in a safe and sound manner and in compliance with applicable laws and regulations, including those related to consumer protection.”
Comments are due June 1.
(April 16, 2021) Samuel Schumach was tapped as deputy director for external affairs and communications at NCUA this week by agency board Chairman Todd Harper. Schumach previously served as legislative affairs officer for the Federal Aviation Administration (FAA). Before that, he was a media spokesperson for the CFPB and had also served as press secretary for the Office of Personnel Management (OPM), the White House Office of National Drug Control Policy, and for former Senate Majority Leader Harry Reid (D-Nev.) … Two in five of new hires (42.1%) in 2020 were people of color, and gender diversity among senior executives achieved parity last year for the first time, NCUA said this week in a report outlining the agency’s hiring practices. In its Office of Minority and Women Inclusion (OMWI) annual report, NCUA also said 188 federally insured credit unions submitted Voluntary Credit Union Diversity Self-Assessments in 2020, up 59.3% from the 118 submissions in 2019 … Federal legislation to mitigate risks related to legacy contracts that use LIBOR (London Interbank Offered Rate) will be needed, Federal Reserve General Counsel Mark Van Der Weide told a congressional hearing Thursday. He said such legislation would establish a uniform national framework for replacing LIBOR in legacy contracts that do not provide for an appropriate fallback rate. Additionally, he indicated, a statute could diminish the instance of lawsuits that he said are inevitable due to the phase out of the reference rate. A witness at the same hearing from the OCC made essentially the same points. LIBOR is scheduled to be phased out at the end of this year (meaning, no new loans or contracts are supposed to be written that use the rate). Additionally, existing “legacy contracts” (or those that are in force now and using the reference rate) have until June 2023 to discontinue the reference rate … An executive order directing federal financial regulators (including NCUA) and others to combat climate-related financial risks is being prepared by President Joe Biden (D), according to press reports this week. The order would be issued in conjunction with a “climate summit” set for next week in Washington. Among other things, the order will also reportedly direct the Treasury Department to assess climate risks to the financial system and report back within 180 days.
LINKS:
Samuel Schumach Named Deputy Director for External Affairs and Communications
NCUA Releases Office of Minority and Women Inclusion Annual Report to Congress
Grace Arnold is now the permanent commissioner of the Minnesota Department of Commerce, as appointed by Gov. Tim Walz (D) Thursday. She replaced Steve Kelley in the role. As commissioner, she heads the department that oversees financial institutions, including credit unions. Previously, she was deputy commissioner of insurance for the Commerce Department, overseeing the life, health, and property and casualty insurance markets in the state. Before that, she spent nearly 10 years at the federal center for consumer information and insurance oversight of the U.S. Centers for Medicare and Medicaid Services where she worked on the technology turnaround of healthcare.gov and policy development during the implementation of the Affordable Care Act.
(April 16, 2021) In another summary prepared this week, NASCUS outlines a bulletin issued by the bureau April 6 detailing its expectations for mortgage servicers’ engagement with borrowers in the closing months of forbearance programs created to help them deal with the financial impact of the coronavirus crisis.
Like all NASCUS summaries, it is a benefit of membership.
The bulletin issued last week follows the bureau’s proposed rules (issued April 5) aimed at preventing “avoidable foreclosures.” The proposed rules, the agency said, seek to “ensure that both servicers and borrowers have the tools and time they need to work together to prevent avoidable foreclosures, recognizing that the expected surge of borrowers exiting forbearance in the fall will put mortgage servicers under strain.”
The follow-up bulletin (Bulletin 2021-02, “Supervision and Enforcement Priorities Regarding Housing Insecurity”), issued the following day, explains the CFPB’s intention to monitor servicers’ engagement with borrowers “at all stages in the process” in coming months and to prioritize mortgage servicing oversight work in carrying out its enforcement and supervision in the coming year.
LINK:
NASCUS Summary: CFPB Bulletin 2021-02, Supervision and Enforcement Priorities Regarding Housing Insecurity (members only)