MIAMI GARDENS, Fla.—Following the well-publicized problems facing tiny North Dade Community Development Federal Credit Union, which got heavily involved with money services businesses (MSBs), NCUA Tuesday liquidated the $3-million CU.
North Dade’s problems, covered by national media and a focus of a CUToday.info investigative series, was fined $300,000 last year by the Financial Crimes Enforcement Network (FinCEN) for significant Bank Secrecy Act (BSA) violations. That $300,000 fine represented almost half of the CU’s net worth. The tiny CU did more than $1 billion in outgoing wires in 2013.
North Dade’s Call Report data revealed a credit union whose direction markedly shifted over the last three years—away from providing typical credit union services to relying heavily on income from wire transactions.
North Dade’s focus on lending and membership growth apparently changed in 2010. Total loans fell by almost 50% since 2010, dropping to $457,454 through September of 2014 from $889,197 in 2010. Share drafts dipped to $181,131 last year from $265,219 in 2010. Regular shares declined to $2 million in 2014, from $3.8 million in 2010.
Membership growth continued to fall, dropping by 42% in 2011 and 14.38% in late 2014. NDCDFCU was founded in 1997 and describes itself on its website as place providing “friendly, growth-oriented financial services that also serve to support a successful community,” and that it offers that community a “wide range of financial services, debt counseling, entrepreneur classes and fee free business and personal checking.”
The CU saw dramatic swings in its financials in recent years, with net worth moving from 5.43% in 2011 to 10.02% in 2012, to 21.01% in 2013 and 16.88% in late 2014. The CU showed a net income loss of $113,733 in 2011, and then profits of $191,379 in 2012 and $384,290 in 2013. Through September of 2014, North Dade posted a $298,615 loss, without the FinCEN fine factored in.
Despite 16.88% capital, losing almost half of its $616,641 net worth challenged the viability of the CU. North Dade last year showed a significant drop in other income, finishing $38,698 in the black through September, well off last year’s $964,037 total.
According to FinCEN, the credit union, which had five employees, contracted with a third-party vendor MSB to provide services and sub-accounts to 56 MSBs located in high-risk jurisdictions far outside its field of membership, including locations in Central America, the Middle East, and Mexico. The revenue generated from these accounts constituted 90% of North Dade’s annual revenue in recent years.
“North Dade’s anti-money laundering (AML) failures exposed the United States financial system to significant opportunities for money laundering and terrorist financing from known high-risk jurisdictions,” said FinCEN.
NCUA stated in a release that it made the decision to liquidate North Dade and discontinue operations after determining the credit union had violated various provisions of its charter, bylaws and federal regulations.
North Dade is the second federally insured credit union liquidation in 2015.