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Aug. 31, 2018

In just 2nd letter to CUs, NCUA outlines
‘beneficial ownership’ expectations

NCUA examiners will accept reasonable, good faith efforts to comply with “beneficial ownership” rules by federal law enforcement, a letter to credit unions issued by the agency this week indicated. However, in only its second such letter this year (LTCU 18-CU-02), the agency said that examination expectations under the Financial Crimes Enforcement Network’s (FinCEN) beneficial ownership rules will not protect credit unions against potential penalties from FinCEN for noncompliance with the Bank Secrecy Act/Anti-Money Laundering (BSA/AML) requirements.

“The NCUA recognizes that some credit unions may need additional time to implement changes and to fully comply with the new requirement,” NCUA Board Chairman J. Mark McWatters states in the letter, issued Monday. “The NCUA examiners have been instructed to accept a credit union’s reasonable and good faith efforts to comply with the new rule throughout 2018. However, credit unions should understand that the NCUA’s acceptance of good faith efforts for supervision purposes does not shield a credit union from FinCEN penalties that could arise from failing to comply with all BSA/AML requirements.”

The FinCEN rule, which took effect this May, codifies BSA/AML customer due diligence (CDD) requirements and adds a new requirement to identify and verify the identity of individuals (the beneficial owners) who own or control certain legal entity members (subject to a number of exclusions and exemptions). The requirement, finalized in 2016, took effect May 11.

NCUA’s letter includes several attachments, including a supervisory letter setting out examination expectations provided to the NCUA examiners regarding the review of a credit union’s compliance with BSA/AML requirements. This includes new examination procedures that will be incorporated into the Federal Financial Institutions Examination Council (FFIEC) Bank Secrecy Act/Anti-Money Laundering Examination Manual.

Also attached are the BSA questionnaire to guide examiners through their reviews, an overview of the CDD requirements and exam procedures, and an overview of the beneficial ownership rule. The letter instructs credit unions to contact their regional office of state supervisory authority for any additional questions.

NCUA Letter to Credit Unions (18-CU-02)

NCUA BSA Resources


State regulators from 13 states wrote to congressional leaders late last week urging them to create a safe harbor for financial institutions compliant with state laws serving legitimate marijuana businesses -- or to entrust sovereign states with the full oversight and jurisdiction of marijuana-related activity.

The Aug. 24 letter was signed by regulators from Alaska, Connecticut, Hawaii, Louisiana, Michigan, Montana, Nevada, New York, Oklahoma, Oregon, Pennsylvania, Utah, and Washington. It was addressed to Senate and House leaders: Senate Majority Leader Mitch McConnell (R-Ky.), Senate Democratic Leader Chuck Schumer (D-N.Y.), House Speaker Paul Ryan (R-Wis.) and House Democratic Leader Nancy Pelosi (D-Calif.).

The regulators wrote that the “well-documented conflict between federal and state law” has created barriers for banks and credit unions that want to serve businesses involved in state-licensed marijuana activities, especially in the 31 states and the District of Columbia which have legalized medical and/or recreational marijuana usage. “This has resulted in regulatory and legal risk at the insured depository level, propagated de-risking, and created a ‘cash and carry’ industry,” they wrote.

They said this environment, among other things, diminishes states’ abilities to identify operators working to circumvent state and federal oversight, and “raises concerns with respect to public safety, increases difficulty tracking the flow of funds, and contributes to a loss of economic activity, workforce development and community development opportunities.”

The state supervisors pointed out that financial institutions had relied on the "Cole Memo" from the Department of Justice (DOJ) and guidance from the Financial Crimes Enforcement Network (FinCEN) related to BSA/AML requirements. “Earlier this year, the Department of Justice rescinded the Cole Memo, leading to uncertainty about banks' ability to serve this industry without running afoul of federal statutes,” they wrote.

“It is incumbent on Congress to resolve the conflict between state cannabis programs and federal statutes that effectively create unnecessary risk for banks seeking to operate in this space without the looming threat of civil actions, forfeiture of assets, reputational risk, and criminal penalties,” the 13 regulators stated in the letter. “We urge Congress to consider legislation that creates a safe harbor for financial institutions to serve a state-compliant business, or entrusts sovereign states with the full oversight and jurisdiction of marijuana-related activity.”

Regulators signing the letter were: Patrice Walsh, Acting Director, AK Division of Banking and Securities; Jorge Perez, Commissioner, CT Department of Banking; Iris Ikeda, Commissioner of Financial Institutions, HI Department of Commerce and Consumer Affairs; John Ducrest, Commissioner, LA Office of Financial Institutions; Patrick M. McPharlin, Director, MI Department of Insurance and Financial Services; Melanie Hall, Commissioner, MT Division of Banking and Financial Institutions; George E. Burns, Commissioner, NV Financial Institutions Division Department of Business and Industry; Maria T. Vullo, Superintendent, NY Department of Financial Services; Mick Thompson, Commissioner, OK State Banking Department; Andrew R. Stolfi, Administration/Insurance Commissioner, OR Division of Financial Regulation; Robin Wiessmann, Secretary, PA Department of Banking and Securities; G. Edward Leary, Commissioner, UT Department of Financial Services; and Gloria Papiez, WA Department of Financial Institutions.

Regulators’ letter to congressional leaders, re: marijuana safe harbor


Interim guidance about the new tax law’s impact on unrelated business income tax (UBIT), which state-chartered credit unions are subject to paying, is expected to be published next week by the federal tax collecting agency.

The IRS has indicated the guidance will be published in Notice 2018-67 (in Internal Revenue Bulletin 2018-36), dated Sept. 4. According to reports, the Tax Cuts and Jobs Act of 2017 (TCJA, enacted in December) requires a separate computation of UBIT for tax-exempt organizations with more than one unrelated trade or business. Before the new tax law, losses generated by one business could be used to offset income derived from another for organizations operating more than one unrelated trade or business activity. Under a provision in TCJA (which took effect Jan. 1), losses generated by one unrelated trade or business cannot be used to offset income derived from another unrelated trade or business. Any increase, as a result, in unrelated taxable income is required to be reported on revised IRS Form 990-T.

According to the Credit Union Natl. Assn. (CUNA), it is continuing to urge IRS and the Treasury Department to delay the new tax provisions, due to a “significant lack of clarity in the underlying provision requiring separate computation of UBIT for entities with more than one related business as well as uncertainty regarding the provision that includes the definition of fringe benefits and what is covered under the new UBIT tax expansion.”


The credit union and two other advisory panels at the BCFP (formerly known as CFPB) have been pared down in membership slots to six each – about one-third the size of the previous panels -- according to new charters for the panels that were signed and dated June 5 by Acting Director John (“Mick”) Mulvaney but posted only recently on the bureau’s website.

According to the new charters, posted last week on the bureau’s website, the Credit Union Advisory Council (CUAC) and the Community Bank Advisory Council (CBAC) will each have six members, each with one-year terms, and each council will meet at least once a year. Only credit union and community bank employees will be included, respectively, on the CUAC and CBAC, the charters show. Previously, the CUAC had 17 members, and the CBAC 19.

A third panel, the Consumer Advisory Board (CAB) – the only one required by statute; the other councils exist as “discretionary” actions by the bureau’s director -- is required by law to have at least six members who are recommended by the regional Federal Reserve Bank presidents on a rotating basis. These six are the only members provided for under the advisory board’s new charter. The board, also as provided under law, will meet at least twice a year, the charter states. Previously, the CAB had 25 members.

While the charters are dated June 5, there are handwritten notes in the “filing date” sections indicating the charters were amended June 20 and filed with the bureau director (Mulvaney), the Senate Banking Committee, House Financial Services Committee, the Committee Management Secretariat of the General Services Administration (GSA) and provided to the Library of Congress.

In June, the bureau announced that the advisory panels would be reconstituted to “new, smaller memberships.” In a blog post, the agency stated the changes were part of a response to comments received on a request for information (RFI) earlier in the year on bureau external engagements. The bureau also said in that blog post that it would use the 2018 application and selection process “to reconstitute the current advisory groups with new, smaller memberships” by both “right-sizing” the councils and ramping up outreach to external groups. Doing so, the bureau said, would “enhance its ability to hear from consumer, civil rights, and industry groups on a more regular basis.”

BCFP charter of the bureau’s Credit Union Advisory Council


The Senate Tuesday confirmed the nomination of Richard Clarida as vice chairman of the Federal Reserve Board, on a vote of 69-26. He is positioned to join the board immediately, and certainly before the next meeting of the rate-setting Federal Open Market Committee (FOMC) set for late September. Clarida, 61, was nominated to the post, a four-year term, by President Donald Trump in April. Trump also nominated Clarida to serve out the remainder of a current Fed governor term that ends Jan. 31, 2022; with Tuesday’s vote, he was also confirmed by the Senate for that position.

Two more nominations for seats on the Fed board are pending in the Senate: for Michelle “Miki” Bowman (now the commissioner, Kansas State Bank Commission); and for Marvin Goodfriend (an economics professor at Pittsburgh’s Carnegie-Mellon University). Bowman was recommended for confirmation by the Senate Banking Committee in June on a vote of 18-7. Goodfriend was recommended for confirmation by the panel Feb. 8, on a partisan vote of 13-12. The Senate has not yet set dates of confirmation votes for either.

Nor has a confirmation vote been set for Kathleen “Kathy” Kraninger to be the next director of the BCFP (formerly known as the CFPB). And, the nomination of Rodney Hood for a seat on the NCUA Board (to serve the remainder of a six-year term expiring in August 2023) has not yet been scheduled for a hearing before the Banking Committee.


NCUA said this week it had chartered its first new federal credit union in 2018, this one in New York to serve Nepali Americans. The agency said the new credit union – dubbed Everest FCU – will serve about 15,000 members of the Non-Resident Nepalis National Coordination Council of USA. According to the agency, Everest FCU during its first year of operations, plans to offer regular shares, share drafts, share certificates, individual retirement accounts, unsecured loans, share-secured loans, auto loans, credit card loans, money orders, cashier’s checks, wire transfers, and electronic banking.

NCUA Charters Everest Federal Credit Union

EDUCATION: Fall calendar ready to kick off …

The new month of September means the NASCUS slate of fall educational offerings get underway – including directors’ colleges, examiner schools, our mortgage symposium, and the NASCUS/CUNA BSA Conference. Here’s a rundown:

  • Sept. 17, Connecticut Executive Forum (Rocky Hill);
  • Sept. 18, Colorado Executive Forum (Denver);
  • Sept. 18, Ohio Directors’ College (Reynoldsburg);
  • Oct. 10-11, Ohio Examiners School (Columbus);
  • Oct. 15-19, Michigan Examiners School (Ann Arbor);
  • Nov. 5-8, NASCUS/CUNA BSA Conference (Louisville, Ky.);
  • Nov. 13, Kansas/Missouri Directors College (Overland Park, Kansas);
  • Nov. 27-28, NASCUS Mortgage Symposium (Needham, Mass.);
  • Dec. 4, Tennessee Directors’ College (Nashville, presented in partnership with the Tennessee Credit Union League).

NASCUS directors’ colleges are among the only venues in the credit union meeting space where credit union directors — along with senior credit union staff — can hear first-hand from state regulators and learn of their expectations of credit union directors, and the issues that directors will confront, including BSA requirements, cyber security, succession planning, interest rate risk, national issues and much more.

Our examiner schools are multiple-day events offering a complete look at the ever-changing regulatory environment, with a thorough run-down of the impact on federally insured, state-chartered credit unions from new or proposed federal regulations.

For more details on these and our other calendar events, see our fall agenda at the link below.

NASCUS Education & Training Fall 2018 Agenda

…. ON THE ROAD: thanks for participating, speaking in WI…

Last week, NASCUS (along with the Wisconsin Office of Credit Unions and the Wisconsin Credit Union League) sponsored professional development training in Madison, WI. Thanks to those two groups, as well as our speakers for providing their expertise at the event, including: Brian Knight, EVP and General Counsel, NASCUS; Tom Theune, Deputy Director, Office of Credit Unions; Paul Guttormsson, Vice President of Legal & Compliance, Wisconsin Credit Union League; Ken Otsuka, Risk Management Senior Consultant, CUNA Mutual Group; and Becky Garton, Consultant 1, Risk Management, CUNA Mutual Group.


Learn more about NASCUS and the benefits it offers to credit unions and other state credit union system players in a Nov. 1 “NASCUS 101,” a no-charge event featuring an overview of the benefits of membership in the association. Participants will learn about the NASCUS commitment to the state credit union system, and NASCUS’ unique role. Also under review: NASCUS Advocacy, training and education agendas for 2019; how NASCUS facilitates access to all state CU regulators; and how members can participate in dialogue sessions with regulators to gain national perspective on regulatory and compliance issues.

Info/registration for NASCUS 101; Thursday, Nov. 1, 2-3 p.m. ET

BRIEFLY: Congrats to Wright-Patt CU; OCC unveils CRA revamp; welcome new members; happy Labor Day

Congratulations to NASCUS-member Wright-Patt CU of Beavercreek, Ohio, for being honored with an “Editor’s Choice Award” by a nationally recognized website focusing on credit issues. The credit union’s efforts in member education, counseling, and specialized products to foster their financial success were cited by the website,, which calls itself “the authority on bad credit.” See the link below for more … The OCC this week issued its long-awaited proposal to revamp rules implementing the Community Reinvestment Act (CRA). In an advance notice of proposed rulemaking, the agency said modernization of the rules would strive to “better achieve the statute’s original purpose, increase lending and investment where it is needed most, and reduce the burden associated with reporting and assessing CRA performance” … NASCUS welcomes several new members this week: Simplicity Credit Union, of Marshfield, Wis., with assets of nearly $245 million and 24,000 members -- Pat Wesenberg is the president and CEO; A.U.B. Credit Union, of Athens, Tenn., with about $1.63 million in assets, and 127 members -- Ryne Frazier is the president and Myrl Vaughn is the manager; West Virginia Credit Union League, based in Parkersburg, W.V. (as an associate member) - Ken Watts is the president and CEO … Here’s to a happy, and safe, Labor Day holiday to all this weekend!

LINKS: Wright-Patt Credit Union Offers Members Education, Counseling, and Specialized Products to Foster Their Financial Success

Information Contact:
Patrick Keefe,