The National Credit Union Administration recently notified member institutions of three risk areas, including money services businesses accounts, reloadable prepaid cards and remote deposit capture, that could be used to launder money.
“Complying with the Bank Secrecy Act can be a challenging task, but it essential to protect credit unions and our financial system from money laundering, terrorist financing and other illicit financial transactions,” NCUA said in a report last month.
Credit unions have seen an increase in the number of MSBs seeking accounts, though NCUA said the increase can likely be attributed to an increase in the number of banks that have discontinued servicing MSB accounts due to regulatory and compliance risks.
NCUA said the wide diversity of MSBs leads to varying risk across member institutions, cautioning members that the risk levels can change quickly. The agency recommended several procedures to mitigate the risk, including properly identifying member accounts as MSBs, determining the potential risk posed by the MSB, conducting adequate and ongoing due diligence of the MSB relationship and ensuring MSB accounts are appropriately included in the institution’s suspicious activity monitoring and reporting.
NCUA also recommended that member institutions provide “extensive knowledge and training” for staff members working with MSB accounts and to consider the risks and issues before providing MSB account services.
Additionally, NCUA warned about the use of reloadable prepaid access cards, which have grown in popularity in recent years. Credit unions often allow members to give a secondary card attached to the primary account to family member to give them access to the funds.
“This flexibility can increase a credit union’s exposure to money laundering activities when, for example, funds are deposited on the primary card and withdrawn through the secondary card by an unknown party across the country or internationally,” NCUA said.
NCUA advocated the use of effective customer identification programs and urged institutions to ensure that their BSA compliance programs are capable of identifying and reporting suspicious activity.