CUNA joined the National Association for State Credit Union Supervisors (NASCUS) earlier this month for its annual Bank Secrecy Act/Anti-money Laundering (BSA/AML) Certification Conference in Tempe, Ariz. The three-day event featured presentations on the most pressing compliance issues facing credit unions today.
Former FBI agent and prosecutor Chris Swecker discussed the importance of BSA officers, which he said “support the most important database in law enforcement” and said compliance officers like those in attendance play a critical role.
He said BSA and AML reports provide valuable information that enables law enforcement to initiate investigations where warranted, since the financial institutions are on the ground and seeing what transactions are taking place.
He also noted that fraud accounts for $620 billion in annual losses in the U.S. each year.
Warren Barnett, vice president of risk management at Hudson Heritage Federal Credit Union in Middletown, N.Y, addressed enhanced due diligence (EDD), which along with customer due diligence (CDD) is a cornerstone of risk management.
While CDD is the process of performing background checks on potential members, EDD creates a more comprehensive understanding of the risks associated with potential members.
“EDD is becoming more important as members do more business through multiple channels, especially digital channels,” he said, noting relationships with cash intensive businesses, money services businesses, casinos, pawnshops, wholesale jewelers, cannabis businesses and others are considered “high-risk relationships.”
Later in the conference, accountant Sue Landauer discussed synthetic fraud, one of the fastest growing drivers of money laundering, as well as other trends in money laundering.
Synthetic fraud occurs when the criminal fabricates an identity by applying for credit, typically by obtaining an individual's Social Security number and using a fake name, Landauer says.
The perpetrator is initially turned down for credit but eventually develops a profile and establishes credit.
Other trends in money laundering, include data furnishing, bust-out schemes, piggybacking, direct purchases from China and using convertible virtual currency such as bitcoin.