Two of the top NCUA compliance priorities this year are the Bank Secrecy Act’s Beneficial Ownership regulations and the HMDA (Home Mortgage Disclosure Act) Fair Lending rules.
These are two of the topics addressed in our recent webinar, because you can be sure that NCUA will be looking closely at these in upcoming exams. Credit unions have been given some leeway to work toward compliance in the past, but that time has pretty much run out.
In the recent audits that we have done for credit unions, we’re seeing that far too many of them are not yet ready with the proper documentation when it comes to BSA Beneficial Ownership.
Beneficial ownership applies to legal entities such as corporations, limited liability companies, or general partnerships. Those individuals who directly or indirectly own 25 percent or more of the entity, along with those who have “significant responsibility” in terms of controlling, managing, or directing the entity, are considered beneficial owners. They must be identified and have their information added to the account.
What is most important to credit unions is that they can prove that they have obtained the required information about individuals who have control or ownership of the legal entities they have opened or changed accounts for in the past year. To be prepared, we advise:
- Be sure your credit union has updated policies and procedures properly to match the requirements.
- Schedule a policy review and demonstrate that the credit union board reviews the policies and risk assessment at least annually.
- Ensure that the credit union staff is trained on how to properly collect beneficial ownership information for each legal entity account
- Tip: Use the form that FinCEN (Financial Crimes Enforcement Network) provides. It’s easy to use and saves you the trouble of creating your own form.
One of the biggest issues we see with HDMA/Fair Lending compliance is proper posting of lobby notices, with the revised wording that is now required as a result of Regulation C. The disclosure procedure is also important.
The posting itself is straightforward enough, with the notification to be placed in a clear and conspicuous place, ideally in an entry vestibule or similar area where everyone passes through.
As far as handling a member or visitor request for the HMDA data, it’s important to make sure your staff is properly trained on what specific disclosure is provided, and how to fully comply with the rules surrounding these requests.
It is actually much easier now; at one time it might have been necessary to print a sizable number of pages for the rare person who requested the information. Now you can simply hand that person a single sheet that clearly directs them to the Consumer Financial Protection Bureau’s website.
A couple of other pieces of advice for the HMDA/Fair Lending compliance would be to ensure that the HMDA data on the Loan Application Register (LAR) matches the data on the loan file, and is updated within 30 days of the end of each quarter. Through frequent data reviews and employee awareness, the credit union can guarantee that they meet both of these requirements.
In the webinar, we offer more detail about both Beneficial Ownership and HMDA/Fair Lending, as well as other areas where NCUA is sure to be looking closely at policies and procedures this year.
It’s critical that your staff knows and follows these rules. Not doing things correctly can result in some highly painful fines for the credit union, and nobody wants that.