New AML Guidance Adopts Reg Burden Reductions Recommended by WOCCU
Volume 6, Number 8
November 21, 2017
New AML Guidance Adopts Reg Burden Reductions Recommended by WOCCU
The Financial Action Task Force (FATF) earlier this month issued new anti-money laundering/countering the financing of terrorism (AML/CFT) Guidance on Private Sector Information Sharing and Guidance on AML/CFT measures and financial inclusion that incorporate World Council of Credit Unions’ (WOCCU’s) recommendations for reducing regulatory burdens on financial cooperatives made in April 2017 and July 2017. The FATF is the global standard setting body for AML/CFT rules. The new FATF guidance should reduce credit unions’ compliance burdens by allowing financial cooperatives to resolve AML/CFT electronic payments red flags more easily as well as reduce barriers for financial cooperatives accepting members who do not have standard identification documents such as a passport.
The FATF’s Guidance on Private Sector Information Sharing significantly increases the ability of unaffiliated financial institutions to share AML/CFT information, such as to resolve red flags. The new FATF guidance allows increased AML/CFT information sharing between unaffiliated financial institutions in five contexts: (1) correspondent banking relationships; (2) relationships with money or value transfer service providers (such as remittance firms); (3) wire transfer remittance information (even when there is no direct correspondent banking relationship between the originating institution and the receiving institution); (4) situations where a bank or credit union is relying on AML/CFT customer due diligence conducted by a third-party; and (5) communications with supervisory agencies.
The FATF’s updated Guidance on AML/CFT measures and financial inclusion also adds a new “Supplement on Customer Due Diligence” that: (a) permits institutions to exempt products and services with a low-risk for money laundering or terrorist financing from some AML/CFT controls; (b) provides numerous examples of simplified approaches to AML/CFT customer due diligence from Australia, Brazil, Canada, the European Union, Mexico, the Netherlands, New Zealand, the United States of America and other jurisdictions; and (c) increases financial institutions’ flexibility to use new or alternative forms of identity documentation, including digital solutions, to conduct customer due diligence.
WOCCU Urges Basel Committee to Regulate Fintechs like Credit Unions
The World Council of Credit Unions (WOCCU) urged a level playing field where financial technology (“fintech”) firms are subject to the same regulatory requirements as credit unions in WOCCU's comments to the Basel Committee on Banking Supervision on the Committee’s Consultative Document – Sound Practices: Implications of fintech developments for banks and bank supervisors. Fintech companies are technology companies that typically do not have a depository institution charter but offer financial services within the “business of banking.”
WOCCU urged the Committee to promote a regulatory level playing field by ensuring that fintech companies are subject to the same regulatory requirements that apply to authorized deposit-taking institutions such as banks, credit unions, and building societies, including that fintechs be subject to comprehensive prudential, consumer protection, data protection and anti-money laundering/countering the financing of terrorism (AML/CFT) regulation.
ENCU Urges Proportionality for EU Fee-Setting Rules on Cross-Border Electronic Payments
The European Network of Credit Unions (ENCU) urged the European Commission not to regulate cross-border interchange and international transaction fees in comments filed in response to the Commission’s Consultative Document on Transparency and Fees in Cross-Border Transactions in the EU. The ENCU urged the Commission to consider the disproportionate impact that the proposed price-setting regulations would likely have on smaller credit unions. The ENCU urged the Commission, if it does proceed with rate-setting rules for cross-border electronic transaction fees, to allow credit unions to recoup all of their costs related to operating electronic payments systems, including technological and fraud-related expenses.
European Parliamentarians Support Increasing Credit Union Business Lending
The European Parliament Credit Union Interest Group met on November 7th with the European Network of Credit Unions to discuss how the European Union can promote increased business lending to small and medium-enterprises by credit unions. Credit unions have a long history of business lending in Europe beginning in the 1850s with agricultural loans. Today, European credit unions have billions of Euros in available lending capacity that can be used to provide credit to small and medium-sized businesses in a number of European Union member states.
The Interest Group, a caucus for Members of the European Parliament (MEP) who support credit unions, held the meeting at the European Parliament's Espace Léopold in Brussels. MEP Marian Harkin (Republic of Ireland), who is Co-Chair of the Interest Group, and MEP Paul Tang (the Netherlands), who is Vice-Chair of the Interest Group, engaged European Commission representatives and European Network of Credit Unions members on the challenges credit unions face when lending to small and medium-sized businesses as well as on the available European Union mechanisms to support increased credit union business lending.
Astrid Bartels, team leader for the European Commission’s program for Competitiveness of Enterprises and Small and Medium-sized Enterprises (COSME), which is part of the Commission’s Directorate General on Internal Market, Industry, Entrepreneurship and Small and Medium-Enterprises, addressed the Interest Group to discuss COSME’s available loan guarantees for loans made to small and medium-sized businesses. COSME can issue guarantees that cover up to 50 percent of the losses on guaranteed business loans if the guarantees are used to help the lender increase its lending to small and medium-sized enterprises.
Georgie Friederichs, director of Samenwerkende Kredietunies (Dutch Association of Co-operating Credit Unions) in the Netherlands, presented to the Interest Group on Dutch credit unions’ lending to small and medium-enterprises. “Since 2008, bank lending to small and medium-enterprises has decreased in the Netherlands, especially for business loans that are in lower amounts, and Dutch business owners started forming credit unions to provide new sources of business credit to local communities,” said Friederichs. “Credit unions have become a good, safe base for lending to Dutch small and medium-sized enterprises that is helping to accelerate the growth of these businesses.”
Representatives of the Association of British Credit Unions, Ltd. (ABCUL), the Irish League of Credit Unions (ILCU), the National Association of Co-operative Savings and Credit Unions (NACSCU) of Poland, and World Council of Credit Unions also shared their views with MEPs on how European Union policy can support increased credit union business lending in Europe.
Michael S. Edwards
VP & General Counsel
World Council of Credit Unions (WOCCU)
601 Pennsylvania Ave., NW, Washington, DC 20004-2601 USA
Office: +1-202-508-6755 | Mobile: +1-215-668-5240 | Fax: +1-202-638-3410
medwards@woccu.org | www.woccu.org