Compliance in 2019 won’t look much different than it has in years past.

Requirements will continue to be complex and ever-changing, and will need a comprehensive and collaborative approach from employees across the credit union.

Here are some of the top regulatory issues to watch in 2019.

Bank Secrecy Act

Toward the end of 2018, the Financial Crimes Enforcement Network (FinCEN) and federal financial institution regulators highlighted the potential benefits of collaborative arrangements and technological innovation to increase the effectiveness and efficiency of Bank Secrecy Act and anti-money laundering (BSA/AML) compliance programs.

In December, NCUA and federal banking agencies issued a joint statement to encourage institutions to consider, evaluate, and, where appropriate, responsibly implement innovative approaches to meet their BSA/AML compliance obligations.

Innovations such as artificial intelligence and digital identity technologies can strengthen BSA/AML compliance approaches and further efforts to protect the financial system against illicit financial activity.

FinCEN and banking agencies also issued a statement to address the benefits of financial institutions entering into collaborative arrangements to manage their BSA/AML obligations more efficiently and effectively.

Among other measures, the statement highlighted the potential benefits of collaborative arrangements that pool staff, technology, or other resources to increase operational efficiencies, reduce costs, and leverage specialized expertise.

It also outlines risk considerations and mitigation measures associated with such collaborative arrangements.

The agencies will monitor industry developments and encourage responsible innovative approaches in BSA/AML compliance programs, and clarify supervisory expectations when appropriate and necessary.

Home Mortgage Disclosure Act

Based on the feedback CUNA has received from credit unions, many institutions will continue to experience Home Mortgage Disclosure Act (HMDA) challenges well into 2019. The complex rule requires various systems changes.

While the Consumer Financial Protection Bureau (CFPB) was relatively quiet on the rulemaking front under Mick Mulvaney’s leadership, HMDA and Regulation C compliance remain a significant pain point for credit unions.  We’ll see what if any changes are in store under the agency’s new director, Kathy Kraninger.

Nevertheless, credit unions need to ensure they are up to speed on all the 2018 HMDA changes well in advance of the March 1, 2019, HMDA reporting date.

CFPB released the 2019 Filing Instructions Guide and announced the beta launch of the HMDA Platform for data collected in 2018. Credit unions can familiarize themselves with the online HMDA Platform and determine if their sample loan/application register (LAR) data complies with the reporting requirements outlined in the Filing Instructions Guide for HMDA data collected in 2018.

Flood insurance

NCUA and banking agencies issued an interagency proposal to implement the private flood insurance provisions of the Biggert-Waters Flood Insurance Reform Act of 2012.

As mandated by the Biggert-Waters Act, the proposed rule would require lending institutions, including credit unions, to accept policies that meet the statutory definition of “private flood insurance” and permit them to accept flood insurance provided by private insurers that does not meet the statutory definition but does meet certain established criteria.

While generally supporting most of the proposed requirements, CUNA asked NCUA to be mindful of placing additional regulatory requirements on credit unions and to provide adequate time for compliance with any new requirements. The comment period ended Jan. 6, 2017, and no final regulation has been issued to date. Be on the lookout for further developments this year.

Military Lending Act

Credit unions continue to wait for the Department of Defense (DoD) to amend Question & Answer #2 (Q&A2) in the 2017 Military Lending Act (MLA) Interpretive Rule. Q&A2, which addresses certain credit extended for the purchase of a motor vehicle or personal property, has caused confusion and compliance challenges for credit unions and other lenders since it was issued.

Specifically, the answer to Question 2 indicates that a credit transaction that also finances a credit-related product or service (such as GAP or credit insurance), rather than a product or service expressly related to the motor vehicle or personal property, would not qualify for exemption from the requirements of MLA. As CUNA and the Defense Credit Union Council have conveyed to DoD, this interpretation harms servicemembers and seems inconsistent with a common reading of the regulatory text.

Last September, CUNA sent a follow-up letter to DoD and the Office of Management and Budget (OMB), seeking resolution to an ongoing issue with Q&A2 of the DoD’s December 2017 guidance on the MLA rule. DoD has agreed to a “fix” to Q&A2 and provided the change to the OMB for review prior to publication in the Federal Register. However, it is unclear why it has taken so many months to push this change through the process.

Contact the CUNA Compliance Team at cucomply@cuna.coop.

Look for Part II of the 2019 Compliance Outlook in next week's Subscribers Exclusive.