Everyone would like to be well prepared for their annual visit from the regulators. Here is a quick checklist to make sure you have addressed the hot topics for 2016:
• Cybersecurity. This is the number one hot topic of the year. Unfortunately, smaller credit unions do not always have access to technical experts in this area due to limited resources. Sometimes larger credit unions cannot hire these experts away from other higher paying industries. What can management do in these cases to be better prepared?
The first thing is to visit the FFIEC website and take the self-assessment. Go to: ffiec.gov/cyberassessmenttool.htm
• Bank Secrecy Act (BSA) and Office of Foreign Assets Control (OFAC) compliance. Regulators are not shy to assess fines when they feel it is necessary. Audits of compliance with these regulations are currently recommended every 12-18 months, but that may be changing. You will need to have the audit report ready to show the examiners. PolicyWorks also provides this service. For inquiries please contact Dan Collins at firstname.lastname@example.org
Two items of note this year. The first is the registration of Money Service Businesses (MSBs). MSBs include transactional businesses such as check cashers, prepaid card providers, foreign currency dealers, money transmitters, and money orders and travelers checks issuers. An MSB is required to register with the Financial Crimes Enforcement Network (FinCEN) and the state in which it’s conducting business. Credit unions should ensure that any MSB with an account at their institution has been appropriately registered.
The second item of note this year is that the examiners will be checking for proof that 314a searches were performed. Section 314(a) of the USA PATRIOT Act requires certain financial institutions to search their records to determine if they have credible evidence to indicate individuals or businesses may be engaged in prohibited activities or are being sought by law enforcement.
• Early defaults on loans. Examiners will focus on how credit unions monitor and work loans that are less than 60 days past due—in particular, those in the first 30 days of default. They want to be certain that collection efforts are ensuring these loans don’t make it on the delinquency report and cause a potential loss to the credit union.
• Real estate disclosures. There are new requirements for combined Truth in Lending (TIL) and Real Estate Settlement Procedures Act (RESPA). Examiners will be looking closely at these, with an emphasis on making sure the Notice to Borrower of Right to Receive Copy of Appraisal has been provided.
•Risks involved with collateral used for a transportation company. If a member is using their vehicle to provide a transportation service (for example, Uber or Lyft), insurance coverage specifically for these services must be verified. This may be considered commercial use of the vehicle, and the individual’s normal insurance policy may not cover events that occur during this use of the vehicle.
Nebraska law requires Transportation Network Company drivers to carry comprehensive and collision insurance which would protect the credit union collateral during the period for which the vehicle is being used for commercial purposes.
This is certainly not an exhaustive list of things the examiners will be looking for, but it will definitely give you a head start to making them happy.