Compliance Update with Amy K

​New! CECL overview on InfoSight. Plus, NCUA diversity self-assessment results; compliance outlook issued by Fed; and a reminder of the SAFE Act annual renewal. 

by Amy Kleinschmit, Chief Compliance Officer
 
InfoSight Update – New Content
Current Expected Credit Loss (CECL), the new accounting standard, becomes effective after December 15, 2022, and will impact the March 31, 2023 call report. InfoSight has added new content to provide a general overview of CECL and aggregates the many resources available to assist credit unions. Find this new InfoSight content here.

In addition, there are three new RISK Alerts from CUNA Mutual Group now available! Check out the new content today.

In case you missed it, InfoSight provides immediate access to current compliance topics​ which explain: What is the issue (in laymen’s terms)​; How it affects credit unions​; and What credit unions need to do, the action steps needed​. InfoSight also provides helpful tools, such as frequently asked questions and checklists.  InfoSight is provided as a FREE benefit of membership for affiliated credit unions. If you haven’t already, request your account here.
 
NCUA – Self Assessment Results
The National Credit Union Administration (NCUA) recently issued the results of the 2021 Credit Union Diversity Self-Assessment. Additional information on the Assessment and the full report can be found here.

In 2021, 240 credit unions submitted self-assessments. This represents a 28.3 percent increase over the 187 self-assessments submitted in 2020. The credit unions submitting self-assessments represent only 4.8 percent of existing credit unions.

A brief snapshot of the results of the 2021 self-assessment includes: Sixty-one percent of responding credit unions reported a leadership and organizational commitment to diversity; 56 percent reported taking steps to implement employment practices to demonstrate that commitment; and 31 percent reported monitoring and assessing their diversity policy and practices, respectfully. As in previous years, supplier diversity and transparency of diversity and inclusion practices remained areas for improvement.
 
Compliance Outlook – 2022 Third Issue
The 3rd issue of the Federal Reserve System’s Consumer Compliance Outlook has been issued and can be found here. This issue includes a discussion on compliance management systems, but also an article on the “Effects of Communications and Organizational Structure on Compliance Management.” The article discusses the importance of clear communications and appropriate reporting lines to mitigate risk and avoid compliance management deficiencies. To illustrate this important component to a strong compliance management system, the article provides three case studies that discuss findings from three financial institutions and where weaknesses in the compliance management system were observed by the examiner.
 
SAFE Act Annual Renewal - Reminder
SAFE Act – registration renewals and updates. In 2008 the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act) was passed. This mandated a federal registry for credit unions (along with other financial institutions) and their employees who are Mortgage Loan Originators (MLOs). Regulation G, 12 CFR 1007, implements the SAFE Act’s requirements for credit unions.

As a reminder – the annual renewal period for the SAFE Act is has begun. The annual renewal period runs November 1 through December 31 of each year. Reg G requires that a registered MLO must renew the registration during the annual renewal period, confirming their responses remain accurate and complete, and updating information as appropriate.

However, the MLO must update the registration within 30 days if any of the following events occur - a change in the name of the registrant; the registrant ceases to be an employee of the covered financial institution; or certain information required under the regulations becomes inaccurate, incomplete, or out-of-date. Information that must be updated within 30 days includes:

• Convictions of any criminal offense involving dishonesty, breach of trust, or money laundering against the employee or organizations controlled by the employee, or agreements to enter into a pretrial diversion or similar program in connection with the prosecution for such offense(s);
• Civil judicial actions against the employee in connection with financial services-related activities, dismissals with settlements, or judicial findings that the employee violated financial services-related statutes or regulations, except for actions dismissed without a settlement agreement;
• Actions or orders by a state or Federal regulatory agency or foreign financial regulatory authority that: Found the employee to have made a false statement or omission or been dishonest, unfair or unethical; to have been involved in a violation of a financial services-related regulation or statute; or to have been a cause of a financial services-related business having its authorization to do business denied, suspended, revoked, or restricted; Are entered against the employee in connection with a financial services-related activity; Denied, suspended, or revoked the employee's registration or license to engage in a financial services-related activity; disciplined the employee or otherwise by order prevented the employee from associating with a financial services-related business or restricted the employee's activities; or Barred the employee from association with an entity or its officers regulated by the agency or authority or from engaging in a financial services-related business;
• Final orders issued by a state or Federal regulatory agency or foreign financial regulatory authority based on violations of any law or regulation that prohibits fraudulent, manipulative, or deceptive conduct;
• Revocation or suspension of the employee's authorization to act as an attorney, accountant, or state or Federal contractor; or
• Customer-initiated financial services-related arbitration or civil action against the employee that required action, including settlements, or which resulted in a judgment.

Another annual requirement under the SAFE Act – an independent test. 12 CFR 1007.104 requires that the covered financial institution, which includes credit unions, must adopt policy and procedures that provide for independent testing for compliance with this part to be conducted at least annually by covered financial institution personnel or by an outside party.

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

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