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AML/CFT Fraud Prevention Financial Cybersecurity

2020 Goals for Credit Unions Based on NCUA Supervisory Priorities

Terri Luttrell, CAMS-Audit, CFCS
January 27, 2020
Read Time: 0 min

Key Takeaways

  1. Make sure your credit union is filing SARs and CTRs properly.
  2. Thoughtfully consider whether or not your CU can safely and properly serve hemp-related businesses.
  3. Strengthen credit risk by improving your credit union's loan underwriting standards.
  4. Be proactive in cybersecurity controls and implement best practices. 

The new year often brings a time of reflection and goal setting. The National Credit Union Administration (NCUA) has been working on their share of goal setting, as they have released their 2020 supervisory priorities for credit unions, regulation updates, and the agency’s modernization programs. “We made important strides in 2019 towards updating regulations, easing burdens on credit unions, as well as modernizing our examination process. These efforts will continue in the new year,” said NCUA Chairman Rodney E. Hood in a press release.

The agency published its 2020 supervisory priorities to help credit unions prepare for their next exam. From the Bank Secrecy Act and anti-money laundering (BSA/AML) compliance, cybersecurity, credit risk, the implementation of the new standard for current expected credit losses (CECL), consider these goals for your credit union in 2020.  

Bolster BSA/AML through due diligence and reporting

BSA/AML is a priority for the NCUA, and this area will be included in each examination to ensure credit unions are meeting obligations. A key area of emphasis this year includes the customer due diligence and beneficial ownership requirements that came into effect in May 2018. Another area of focus for BSA/AML is on the proper filing of Suspicious Activity Reports (SARs) and Currency Transaction Report (CTR) filings. Ensuring that these reports are filed in a timely, thorough manner for law enforcement and government officials is critical to successfully identify and intervene in illicit activities.

To help with this initiative, it’s imperative that your credit union leverage strategies to ensure that your SAR is noticed by law enforcement. With over 2 billion SARs filed each year, there are several tactics your credit union can employ, from keywords to following FinCEN guidance, to help your narrative stand out.

Know the ins and outs of banking hemp-related businesses

In response to the Agriculture Improvement Act of 2018 (2018 Farm Bill), which removed hemp from the Controlled Substances Act, the NCUA encourages credit unions to thoughtfully consider whether they can safely and properly serve hemp-related businesses.

The changes tied to the Farm Bill shed light on a new opportunity for credit unions looking to bank hemp-related businesses, but it also brings increased risks for institutions taking on these clients. Make sure your credit union understands the key questions to ask in order to properly evaluate the potential value and risk assumed when taking on such businesses.

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Strengthen credit risk by improving underwriting

NCUA examiners will place emphasis on the credit union’s loan underwriting standards and procedures as credit risk management is a fundamental part of the supervisory process. Particularly, examiners will verify a borrower’s ability to service debt without reliance on collateral.

From eliminating manual data entry to standardizing the risk rating process, there are numerous initiatives your credit union can leverage to ensure sufficient controls in place to underwrite loans more efficiently while maintaining – even improving – credit quality to make smarter loans.

Spend your additional time to prepare for CECL wisely

In 2019, the Financial Accounting Standards Board (FASB) voted to delay CECL implementation until 2023 for credit unions and many banks. This year, all eyes are on large SEC filers, as they become the first to comply with the new standard. Examiners will be working with credit union management to discuss plans to implement CECL.

Three years can seem like a long time, but many experts and SEC filers have warned against waiting. During a recent webinar, Felicity Ours, CPA, CRC, of Summit Financial Group ­– a financial holding company with a 2020 CECL implementation deadline – advised banks and credit unions with a 2023 deadline to:

  • Start preparing early
  • Tackle the data gap analysis before selecting methodology/methodologies
  • Resist overcomplicating loan segmentation
  • Remain flexible throughout the process

Be proactive in cybersecurity controls

Cyber threats continue to pose a serious threat to the U.S. financial system. In 2018, the NCUA began using the Automated Cybersecurity Examination Tool (ACET) to assess credit unions’ cybersecurity maturity. In 2020, the NCUA will continue assessments for credit unions with assets over $250 million and begin completing assessments for credit unions with assets over $100 million. The agency will also be piloting new procedures to evaluate critical security controls during examinations.  

To keep your credit union – and your members ­– safe from cyber threats, it’s important to implement cybersecurity best practices. A good place to start is by creating a culture of cybersecurity awareness at your credit union. Don’t wait for examinations, or even worse, a breach in security to begin focusing on cyber threats. Does your credit union partner with third-party vendors, or is it planning on partnering with a third-party this year? Be sure to assess vendor risk management properly and vet potential partnerships diligently for cybersecurity risks.

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About the Author

Terri Luttrell, CAMS-Audit, CFCS

Compliance and Engagement Director
Terri Luttrell is a seasoned AML professional and former director and AML/OFAC officer with over 20 years in the banking industry, working both in medium and large community and commercial banks ranging from $2 billion to $330 billion in asset size.

Full Bio

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