More BS(A)?

by Henry Meier

My favorite credit union stories are the ones about those that started by opening up after church or work for a couple of hours each week. Deposits would be walked down to the bank at the end of the day. For all the contentiousness between banks and credit unions, the two industries have worked together for decades through such relationships and of course many credit unions still depend on them today.

Which brings us to a strange trend that started in West Virginia and Ohio has now spread to New York. Specifically, in an article in yesterday’s CU Times, Alloya’s Victor Vrigian, Jr. reported an increase in the number of banks ending correspondent account relationships with credit unions citing concerns over BSA compliance. I follow this stuff pretty closely and I know other people who do as well and there have been no publicly announced recent changes in BSA or OFAC regulations that would require banks to suddenly close down the correspondent accounts of credit unions.

Here’s what the BSA Examination Manual says about domestic correspondent accounts: “Because domestic banks must follow the same regulatory requirements, BSA/AML risks in domestic correspondent banking. . .are minimal in comparison to other types of financial services. . .” (page 179, FFIEC BSA/AML Examination Manual) There are some unique challenges to correspondent accounts, but given the typical risk profile of your average credit union member, the risks are minimal.

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