Compliance Update with Amy K
by Amy Kleinschmit
Chief Compliance Officer

COVID-19 Fraud & SARs

Unfortunately, a number of credit unions in the Dakotas are all too aware of the scams and frauds that are impacting their members during the COVID-19 pandemic. FinCEN Director Kenneth A. Blanco recently presented virtually at the ACAMS AML Conference.

In his remarks, Director Blanco shared that from February 1 to September 12, 2020, financial institutions have filed with FinCEN over 91,000 SARs referencing COVID-19 and the stimulus programs. Credit unions filed over 14,000 of these SARs, accounting for about 17 percent of all COVID-related SAR filings. 

As a reminder - if the SARs address fraud against any COVID-19 government stimulus program or the CARES Act, please be as specific as possible in naming the program when filing the SAR to expedite getting the SAR to the correct investigative team. 

Different law enforcement teams are investigating fraud in the different government programs, and vague references to “stimulus” or “CARES Act” or “benefit” in SARs hinders their ability to get the information into the right hands. The more specific the SAR narrative, the faster it will get to the appropriate investigators. 

For example:

If the suspicious activity is related to an ACH payment from a state unemployment insurance program, please clearly mention COVID19 UNEMPLOYMENT INSURANCE FRAUD in field 2 of the SAR (Filing Institution Note to FinCEN) as well as in the narrative.  This will make it much easier for your SAR to get to law enforcement teams working with the states on unemployment fraud.

Or, if the activity involves a counterfeit check or ACH payment for the EIDL program, please also clearly mention COVID19 EIDL FUNDS FRAUD in field 2 of the SAR (Filing Institution Note to FinCEN) and state this in the narrative, as there are specific prosecutorial teams working on EIDL fraud.

Ransomware Attack Advisory

FinCEN issued an advisory yesterday on ransomware and the use of the financial system to facilitate ransom payments. This advisory can be found here.

As discussed in the advisory, ransomware is a form of malicious software (“malware”) designed to block access to a computer system or data, often by encrypting data or programs on information technology (IT) systems to extort ransom payments from victims in exchange for decrypting the information and restoring victims’ access to their systems or data.1 In some cases, in addition to the attack, the perpetrators threaten to publish sensitive files belonging to the victims, which can be individuals or business entities (including financial institutions). The consequences of a ransomware attack can be severe and far-reaching—with losses of sensitive, proprietary, and critical information and/or loss of business functionality.

FinCEN explains the role of financial intermediaries in facilitating ransomware payments. Processing ransomware payments is typically a multi-step process that involves at least one depository institution and one or more money services business.

A number of financial red flag indicators of ransomware and associated payments are listed in the Advisory. Credit unions should review these red flags so as to detect, prevent and report any suspicious transactions.

CFPB – Operation Corrupt Collector

Earlier this week, the CFPB announced that it, along with the FTC, three federal partners, and partners from 16 different states, are launching a “nationwide law enforcement and outreach initiative to protect consumers from phantom debt collection and abusive and threatening debt collection practices” called Operation Corrupt Collector.

States reporting actions as part of the operation include Arizona, California, Colorado, Connecticut, Florida, Idaho, Illinois, Indiana, Massachusetts, New Mexico, North Carolina, North Dakota, New York, Ohio, South Carolina, and Washington.

CFPB – Financial inTuition

The CFPB also recently announced a new podcast series designed for students, parents and practitioners on managing finances before, during and after college.

The first part of the series, "Managing Your Money," consists of three episodes:

Episode 1: "Financing Your Future: How to Pay for Higher Education" – This segment will offer tips on preparing for life after high school, and focus on key financial questions one should explore before making a college/higher education decision.

Episode 2: "Managing Money as a Young Adult" ­– This episode will discuss budget and money management tips, including resources offered by the CFPB, and other advice on how to manage finances as a young adult.

Episode 3: "Understanding and Protecting Your Credit" – This episode will provide insight about understanding the importance of your credit and how to protect it. This episode will cover the function of nationwide credit bureaus and credit reports, how credit scores are calculated, how to build credit and more.

The second part of the Financial inTuition podcast series, Student Loan Repayment, will be released in late fall. The three episodes on "Managing Your Money" can be found at:

InfoSight Highlight - Field of Membership Expansion Updated

Beginning October 14, 2020, a credit union applying for NCUA approval of a community charter, expansion, or conversion to designate a Combined Statistical Area (CSA) or an individual, contiguous portion of a CSA as a well-defined local community (WDLC) if the area has a population of 2.5 million or less. The Field of Membership Expansion topic in the Field of Membership channel has been updated to include this information.

USDA – OneRD Guarantee Loan Initiative

Yesterday, the USDA announced the launch of a new, streamlined process for lenders. As discussed in its press release, the USDA eliminated duplicative processes and has launched a common loan guarantee application for the following programs: Water and Waste Disposal Loan Guarantee Program; Community Facilities Guaranteed Loan Program; Business and Industry Guaranteed Loan Program; and Rural Energy for America Guaranteed Loan Program.

Additionally, changes that became effective yesterday include standardized requirements for credit reviews, loan processing, loan servicing and loss claims. These measures will make the application process simpler and faster for lenders. USDA also is providing automatic approval to participate in all four programs to lenders in good standing who are supervised or created by state or federal regulatory agencies.

USDA is hosting a webinar for lenders on Thursday, Oct. 8 at 1:30 p.m. Eastern Time to answer questions about the new processes under the initiative.


As always, CUAD members may contact Amy Kleinschmit with any compliance related questions.


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