Source: South Florida Business Journal
MIAMI GARDENS, Fla.—North Dade Community Development FCU appears to be following the cease and desist order issued by NCUA to stop, or suspend, the activities that led to a $300,000 fine by FinCEN.
Meanwhile, NCUA says its examiners have been doing their job in overseeing the $4-million CU that during 2013 did $1.01 billion in outgoing wires and $984 million in remotely captured deposits.
FinCEN levied the civil money penalty against North Dade CDCU for what the agency termed “significant” Bank Secrecy Act (BSA) violations.
North Dade CEO Beverly Coffey told CUToday.info the credit union is abiding by the C&D that was issued in August 2013. “We have done everything (NCUA) has told us to do,” said Coffey, referring CUToday.info to attorney Edward Reisinger for further comment.
When contacted, Reisinger, a partner at the Birmingham, Ala. firm Trimmier Kudulis, LLC, said North Dade would not be commenting at this time.
In an exclusive interview with CUToday.info, NCUA stated the agency has not instituted any other additional enforcement actions against North Dade since it issued the cease and desist order.
North Dade’s Call Report data shows it finished in the black by $191,379 in 2012 and $384,290 in 2013. But in the year that followed the C&D order the credit union posted a $298,615 loss through September, which does not include the FinCEN penalty. The $300,000 fine represents almost half of the small credit union’s net worth.
The revenues the credit union was generating from the outgoing wires apparently had been propping up North Dade CDCU—from 2004 to 2011, prior to entering the wire business, the CU lost more money than it made. Now the future of the credit union could be in jeopardy.
NDCDCU’s Call Report data reveals 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.
Among numerous steps outlined in the cease and desist, North Dade was ordered to stop doing business with any money service business (MSB) that is not within the CU’s field of membership.
According to FinCEN, the credit union, which has just five employees, contracted with a third-party vendor and MSBs 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 fees generated from these accounts constituted 90% of North Dade’s annual revenue. “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.
Why would MSBs located all over the world choose a small Florida credit union to conduct close to $2 billion in transactions? asked FinCEN when it announced the penalties.
“Credit unions pride themselves on close and low-risk relationships with known neighborhood customers,” the agency stated in a release. “However, North Dade welcomed customers far beyond its field of membership, without adequate policies and procedures to ensure AML compliance . . . This case raises pretty obvious questions that no one seems to have asked.”
That “no one” would seem to suggest its regulator. But NCUA said it has been regulating North Dade effectively and that, in fact, it was the agency’s enforcement actions leading up to the cease and desist that NCUA believes led to the FinCEN penalty.
“We did progressive steps and then the C&D,” explained Myra Toeppe, regional director for Region III. Saying the agency cannot discuss details of supervisory matters, including how long NCUA was aware of North Dade’s practices, Toeppe added, “Our examiners have been doing their jobs (at North Dade).”
According to FinCEN, from 2009 through 2014 North Dade had significant deficiencies in all aspects of its AML program, including its internal controls, independent testing, training, and failure to designate an appropriate BSA compliance officer.
“When the credit union did file suspicious activity reports, the reports were often late and insufficient,” stated FinCEN. “It is of great concern that North Dade failed to even review the 314(a) requests it received. These are time sensitive requests that, by their very nature, are intended to further criminal investigations into significant money laundering and terrorist financing activities . . . When a small institution opens its doors to the world, takes on greater risks than it can manage, and puts profits before AML controls, bad actors are bound to take advantage.”
Toeppe stated that NCUA takes a credit union’s BSA/AML/Office of Foreign Assets Control (OFAC) obligations “very seriously and we don’t tolerate violations by our supervised institutions. We follow the agreement with FinCEN as to how to address such violations and we expect credit unions to follow their obligations to the rules.”
Among steps outlined in the C&D, North Dade was ordered to suspend transacting business with all MSBs until the credit union developed and implemented an adequate BSA/AML/OFAC program that provides a system of internal controls to ensure ongoing compliance and BSA training for appropriate personnel.
The order also called for engaging with a firm or consultant specializing in BSA/AML/OFAC to assist in correcting the deficiencies in North Dade’s BSA/AML/OFAC program, and to hire a BSA compliance officer.
Asked what types of MSBs North Dade was working with, Toeppe said the agency could not comment due to privacy laws.
A spokesperson for FinCEN explained the agency would not provide further comment on North Dade outside of what FinCEN stated in its release. When asked by CUToday.info if it was investigating North Dade, the Miami office of the FBI stated it “does not confirm or deny the existence of an investigation.”
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