Compliance Update with Amy K
by Amy Kleinschmit
Chief Compliance Officer

Customer Due Diligence – new FAQs

On Monday, the Financial Crimes Enforcement Network issued three new FAQs on Customer Due Diligence. These FAQs clarify the regulatory requirements related to obtaining customer information, establishing a customer risk profile, and performing ongoing monitoring of the customer relationship in order to assist covered financial institutions with their compliance obligations in these areas. Be sure to review these new FAQs which can be found here.

To touch on the first FAQ, it explains that the CDD Rule does not categorically require the collection of any particular customer due diligence information (other than that required to develop a customer risk profile, conduct monitoring, and collect beneficial ownership information). It goes on to clarify that a covered financial institution may assess, on the basis of risk, that a customer’s risk profile is low, and that, accordingly, additional information is not necessary for the covered financial institution to develop its understanding of the nature and purpose of the customer relationship. In other circumstances, the covered financial institution might assess, on the basis of risk, that a customer presents a higher risk profile and, accordingly, collect more information to better understand the customer relationship.

Remember, you must establish policies, procedures, and processes for determining whether and when, on the basis of risk, to update customer information to ensure that customer information is current and accurate.  Information collected throughout the relationship is critical in understanding the customer’s transactions in order to assist the financial institution in determining when transactions are potentially suspicious.

These FAQs are in addition to guidance issued July 19, 2016 and April 3, 2018.


FFIEC – Joint Statement on Additional Loan Accommodations

A new joint statement from the FFIEC was also issued on Monday which can be found here. This joint statement provides prudent risk management and consumer protection principles for financial institutions to consider while working with borrowers as loans near the end of initial loan accommodation periods applicable during COVID-19. It also emphasizes accounting and regulatory reporting requirements as well as internal control systems.

The joint statement discusses prudent risk management practices that credit unions should follow, such as “applying appropriate loan risk ratings or grades and making appropriate accrual status decisions on loans affected by the COVID event. Generally, following an accommodation, a financial institution reassesses risk ratings for each loan based on a borrower’s current debt level, current financial condition, repayment ability, and collateral.”

The FFIEC also provides important information on working with borrowers that continue to experience financial challenges after the initial accommodation.

Consumer protection laws must be adhered to. Credit unions should ensure that policies and procedures reflect accommodation options offered by the credit union and promote consistency with applicable laws and regulations, including fair lending laws. It is also important to provide appropriate training to employees and other persons responsible for compliance and operational procedures related to any additional accommodation options, including customer service personnel.


Voluntary Credit Union Diversity Self-Assessment

Earlier this week the NCUA issued Letter to Credit Unions 20-CU-23 which can be found here. As stated in the letter by NCUA Board Chairman Rodney E. Hood, “Last year, we had 118 credit unions complete the Annual Voluntary Credit Union Diversity Self-Assessment. The year before that, we had 81. This is progress year-over-year, but it is not good enough. I encourage the industry to take this small step to show your commitment to diversity and inclusion.”

This annual voluntary credit union diversity self-assessment and additional resources can be found here.

The annual voluntary credit union diversity self-assessment is a tool for building diversity and inclusion. It is simple and brief. It has no effect on CAMEL and risk ratings, or how your credit union is supervised. It is available year-round.

Once submitted, the NCUA aggregates the data from the assessment and without identifying any single respondent, issues an annual report on the state of diversity, equity, and inclusion throughout the credit union system. Based on the state of the credit union system, the NCUA also creates and makes available resources that credit unions can use to address challenges and opportunities in diversity, equity, and inclusion.

The Letter to Credit Unions explains, at present, most credit unions do not complete the survey until the end of the calendar year. If you do not want to participate until the end of the year, you can make a voluntary commitment to the NCUA today to take the Annual Voluntary Credit Union Diversity Self-Assessment by emailing


IRS & Form W-2

The IRS recently provided guidance Notice 2020-54 (PDF) to employers requiring them to report the amount of qualified sick and family leave wages paid to employees under the Families First Coronavirus Response Act (FFCRA) on Form W-2.

Employers will be required to report these amounts either on Form W-2, Box 14 or in a statement provided with Form W-2. The guidance provides employers with optional language to use in the Form W-2 instructions for employees.



The CFPB recently issued two FAQs relating to HMDA. These FAQs address reporting requirements for certain data points, and specifically discuss reporting when the information is not the dispositive factor in a credit decision. Find these and all other HDMA related FAQs here.


Virtual Hike the Hill

It is vital that Dakota credit unions continue to voice their concerns and issues to our regulators and elected officials even as we navigate operations during a pandemic. Our annual Hike the Hill event to Washington DC has responded to the current situation and is now a virtual event. This virtual gathering will provide credit union professionals the opportunity to meet with key personnel from the NCUA and CFPB and with our federal elected officials. Continuing to share the stories of how the decisions made in Washington DC impact your members is needed for a strong advocacy front.

We have meetings scheduled with the CFPB on September 15 at 1:00 p.m. (CT) and NCUA Board Member, Todd Harper on September 18 at 9:00 a.m. (CT). Register for one or both meetings here. The meeting link and agenda will be provided prior to the meeting. Please note, the Legislative Hike the Hill meetings will be announced once finalized and registration will occur through a different link.

Finally, a quote I ran across recently seems quite timely: “Storms don’t scare me, they teach me how to sail my ship.”  ~Unknown.

Please do not hesitate to contact me, Amy Kleinschmit, with any questions.


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