Security & Fraud

Credit Unions, Community Banks Can Pool Resources To Fight Money Laundering

Federal regulators ruled Wednesday (October 3) that credit unions and community banks can pool resources for anti-money laundering compliance so that they can protect against financial crimes and at the same time keep their costs down.

The Wall Street Journal, citing a statement from the Federal Reserve, the Federal Deposit Insurance Corp., the Treasury Department, the Office of the Comptroller of the Currency and the National Credit Union Administration, reported the decision was borne out of a working group the agencies created to improve anti-money laundering processes. Sigal Mandelker, the Treasury undersecretary for terrorism and financial intelligence, told the Wall Street Journal that the decision is part of a broader effort to strengthen money laundering defenses in the financial system in the U.S. “Sharing resources in no way relieves a bank of this responsibility,” the statement said. “Nothing in this interagency statement alters a bank’s existing legal and regulatory requirements.” The statement noted that while banks could benefit from pooling resources, they should approach sharing resources as they would any other business relationship.

This isn’t the only way in recent months regulators have been helping credit unions and community banks. A recent regulation change could make it easier for credit unions to participate in the real estate underwriting process. Regulators recently raised the threshold that requires a human appraisal for real estate transactions from $250,000 to $500,000. The move could allow more credit unions to integrate automated valuation models (AVMs) into their underwriting process, allowing underwriting tasks to be completed much faster, and potentially doubling or tripling the loans that CUs issue using AVMs. Meanwhile, a credit union advocacy organization is pushing to make changes to regulations that would make it easier for credit unions to serve businesses involved in the legalized marijuana business. The Credit Union National Association (CUNA) recently threw its support to a trio of bills that could allow CUs to accept deposits and offer credit and payment services to legitimate marijuana merchants and offer credit unions legal protections from federal regulators.




The pressure on banks to modernize their payments capabilities to support initiatives such as ISO 20022 and instant/real time payments has been exacerbated by the emergence of COVID-19 and the compelling need to quickly scale operations due to the rapid growth of contactless payments, and subsequent increase in digitization. Given this new normal, the need for agility and optimization across the payments processing value chain is imperative.