New York’s Department of Financial Services seized Municipal Credit Union, New York’s oldest credit union, on Friday (May 17), saying it is facing “unsafe and unsound” conditions.
The move comes after its ex-Chief Executive Officer Kam Wong pleaded guilty to embezzling funds, reported Reuters. According to the report, the former CEO pleaded guilty in November to embezzling millions of dollars from the credit union. Wong was in charge from 2007 until 2018. The executive was charged with submitting fake invoices for dental work, got millions of dollars of payments and purchased $3.55 million worth of New York State Lottery tickets with the money he embezzled. He has agreed to pay Municipal Credit Union $9.9 million in restitution, noted Reuters. He’s slated to be sentenced on June 4.
The National Credit Union Administration was named as Municipal Credit Union’s conservator, Linda Lacewell, the state’s acting financial services superintendent, told Reuters. Regulators are working to ensure the funds of credit union members are protected and that services at the credit union aren’t impacted by the problems. The credit union was formed in 1916. Citing the financial firm’s 2017 annual report, Reuters report it had $2.68 billion in assets and more than 425,000 members.
While the scandal at Municipal Credit Union is getting attention, a bigger problem for credit unions is keeping pace with their larger rivals on the digital front. As FinTechs and the big banks pour millions of dollars into digital offerings, credit unions are rushing to catch up. At the same time, the credit unions are on the hook to not only provide for customer experience but also security. The reality every provider deals with is that every innovation that can make a customer’s life easier can be co-opted by a fraudster to make their illegal enterprise more successful. That leaves credit unions striking a balance between the innovation and service consumers want and the safety and security credit union customers, in particular, have come to expect first and foremost from that relationship.