World Council comments on AML/CFT standards to FATF

April 22, 2016

The World Council of Credit Unions made oral comments on how updated guidance from the Financial Action Task Force can help credit unions preserve access to correspondent banking services.

The comments were made as part of a consultative meeting held April 18-20 at the United Nations Office on Drugs and Crime in Vienna, Austria.

The task force, an inter-governmental body that sets anti-money laundering/countering the financing of terrorism (AML/CFT) rules at the global level, is considering issuing new guidance to clarify banks' AML/CFT responsibilities when they act as a correspondent for credit unions and other financial institutions.

"Over the past few years, it has become more difficult for credit unions to establish and maintain correspondent banking accounts because there was relatively little guidance on the degree correspondent banks could rely on originating credit unions' AML/CFT compliance programs," said Michael Edwards, World Council vice president and general counsel. "We are deeply appreciative of the Financial Action Task Force's efforts to issue clearer guidance in this area, which we have urged since this problem first became apparent to our members roughly three years ago."

The task force's expected guidance on correspondent banking is part of its broader effort to combat banks "de-risking" their customer bases because of concerns about enforcement and reputational risks associated with AML/CFT compliance. Examples of bank "de-risking" their customer bases include banks closing up to 30 credit union correspondent accounts in Ohio and West Virginia, and frequently refusing to open correspondent accounts for credit unions in jurisdictions such as Great Britain, where a small number of major banks control the payments infrastructure.

Other issues discussed at the meeting included potential new guidance on the provision of banking services to nonprofit organizations and on cross-border information sharing about suspicious activities. If finalized, the task force's updated guidance on correspondent banking, nonprofits and information sharing would likely be released later this year, after which regulators would be expected to incorporate the new standards into their national-level AML/CFT rulebooks.