NEW BRUNSWICK, N.J.–Internet Archive FCU here has voluntarily liquidated and paid all of its members their shares in full.
The credit union, which has received media coverage from national outlets that include the New York Times over its allegations that NCUA had stymied its development and growth, has struggled since its founding in 2012. At the time it closed it had $2.25 million and served 391 members.
The credit union with the somewhat odd name was named after a nonprofit, The Internet Archive, founded by Brewster Kahle to maintain a copy of everything published on the Internet. But its charter was to serve low-income individuals and immigrants in New Jersey. Kahle put up $1 million of his own money to capitalize the start-up CU.
In a long blog post in late November of 2015, Kahle, who served as the CU’s chairman,, observed, “It now looks likely that the overwhelming regulatory burden will force us to give up our quest…” And he added later in that same post, “We now know first hand how they go after small and medium sized credit unions and force them to merge their assets into bigger credit unions. If you have an account in a credit union, especially a small or medium sized one, I would worry that they will go after yours.”
A New York Times report on the CU’s struggles can be found here.
NCUA initiated cease-and-desist order proceedings on Nov. 24, 2015, doing so, the agency said, “in order to prevent the credit union from committing unsafe and unsound practices and violations of law, rule, and regulation.”
The CU’s board voted to voluntarily liquidate on Dec. 8, 2015, after which it was required to provide NCUA with a plan for its voluntary liquidation. NCUA approved the voluntary liquidation plan on Jan. 6, 2016, and cease-and-desist proceedings were abated in anticipation of the credit union’s share distribution to members, the agency said.
What Cease & Desist Order Stated
According to NCUA, the temporary cease-and-desist order identified the credit union’s failure to correct ongoing deficiencies since it was chartered, including:
- Unwillingness to open accounts within the field of membership, make loans, and establish operations in the low-income community where the credit union was chartered to serve;
- Violations of the Bank Secrecy Act and USA PATRIOT Act; and
- Weakening financial conditions and mounting losses.
The temporary cease and desist order required the credit union take certain actions, including:
- Develop and implement a marketing plan targeting the field of membership the credit union was chartered to serve: New Brunswick and Highland Park, New Jersey.
- Provide annual, formal Bank Secrecy Act training for all staff and officials.
- Engage a qualified, independent third party to conduct Bank Secrecy Act compliance program testing and report the results of that testing to the credit union’s board of directors.
- Develop a system of internal controls to ensure ongoing compliance with laws and regulations related to the Bank Secrecy Act, anti-money laundering and Office of Foreign Assets Control regulations.
- Develop and implement an adequate customer identification program to verify the credit union knows the identity of any person applying for membership.
- Cease all online account opening activity until a customer identification program has been developed in accordance with federal law, approved by NCUA’s Region II Director and implemented.
- Ensure that lists of subjects and businesses periodically published by the Financial Crimes Enforcement Network are cross-checked against the credit union’s membership records.
- Develop and implement a written strategic business plan and budget directed at reversing the ongoing deterioration of net worth and earnings in order to avoid Prompt Corrective Action.