The Right Tool…

Volume 14, Number 12
December 27, 2023

Advocacy News You Can Use

The Financial Stability Board has been putting a tremendous amount of effort into cybersecurity as a global and systemic issue.  More recently issuing the cyber incident reporting tools and not the toolkit on vendor management all geared towards bring clarity as to the role and responsibility that a credit union might have in protecting its credit unions. Often as a trade association we are quick to jump on any new regulation and the battle against increased regulatory burden is never-ending. 

However, the toolkit that was just released by the Financial Stability Board (and yes it includes proportionality) is actually a useful set of tools that a credit union can use to help it meet its responsibilities when dealing with third party vendors, but also a toolkit that can be use to help protect its operations.  There are several options contained within the toolkit for various approaches.  It is not a perfect tool but WOCCU applauds this approach to regulation that helps a financial institutions not only with various options, but various items to consider when meeting regulatory requirements.  The right tool sometimes is worth its weight in gold.  

WOCCU Applauds Proportionality in FSB’s Toolkit on Vendor Management

WOCCU advocated proportionality was included in the Financial Stability Board’s (FSB) Toolkit for Enhancing Third-party Risk Management and Oversight.  The proportionality language makes it clear that many of the tools are unsuitable for smaller financial institutions and calls for the tailoring of the rules. 

This comes on the release by the FSB of the toolkit for financial authorities and financial institutions for their third-party risk management and oversight. The toolkit was developed in response to concerns over the extent and nature of financial institutions’ interactions with a broad and diverse ecosystem of third-party service providers, which could have implications for financial stability. Namely:

  •  The toolkit was developed in response to concerns over the risks to financial institutions from outsourcing and third-party service relationships.
  • The toolkit aims to strengthen financial institutions’ ability to manage third-party risks and financial authorities’ ability to monitor and strengthen the resilience of the financial system.
  • The toolkit aims to reduce fragmentation in regulatory and supervisory approaches across jurisdictions and financial services sectors and to facilitate coordination among financial authorities, financial institutions, and third-party services providers.

WOCCU participated in various consultations by the FSB including commenting on the consultation paper back in 2022. 

A copy of the toolkit can be viewed here.

Why this matters to your credit union: Third-party risk oversight is an increasing regulatory focus of national-level supervisors.  This toolkit provides some methodologies that can be used by credit unions to meet regulatory expectations. 

World Council Submits Comment Letter regarding FATF’s Guidance on Recommendation 25

World Council recently submitted a letter to the Financial Action Task Force (FATF) with comments regarding its Risk-Based Guidance on Beneficial Ownership (Recommendation 25). Recommendation 25 is additional guidance to help prevent the misuse of legal arrangements for money laundering or terrorist financing.

World Council expressed its support for strong anti-money laundering practices and the additional guidance to aid national-level implementation related to beneficial owners of certain accounts. However, World Council urged FATF to include stronger language ensuring individual countries create and maintain reliable registries for credit unions and other financial institutions to readily identify beneficial owners. World Council provided additional information regarding credit unions and the nature of their services. World Council's letter also requests clearer guidance to more specifically direct individual jurisdictions to take a proportional risk-based approach to establishing implementation requirements, specifically for credit unions.

Click here to read the full letter submitted by World Council.

Why this matters to your credit union: AML/CFT continues to be a source of regulatory burden for credit unions particularly around the area of beneficial ownership of legal entities and trusts.  This evolving standard provides needed additional guidance with respect to a credit union’s obligations in dealing with certain accounts.

New European Authority for Anti-Money Laundering Proposed

The Council and Parliament reached a provisional agreement on creating a new European authority for countering money laundering and terrorist financing (AMLA). The goal is to protect EU citizens and the EU’s financial system by boosting the efficiency of the current AML/CFT framework through an integrated mechanism with national supervisors to ensure certain entities comply with the AML/CFT obligations.

AMLA will have supervisory powers over high-risk obliged entities in the financial sector. It will also have a supporting role in non-financial sectors and coordinate with financial intelligence units in member states. The future location of the new agency’s seat is yet to be determined. AMLA will have the authority to supervise up to 40 groups and entities in its first selection of credit and financial institutions that represent a high risk in several member states. The selected obliged entities will be supervised by joint teams led by AMLA that will carry out assessments and inspections.

Additionally, the provisional agreement expands the scope of AMLA’s supervisory database by requesting the Authority establish and maintain a central database of information relevant for the AML/CFT supervisory system. AMLA will have a general board composed of representatives of supervisors and Financial Intelligence Units from all members states as well as an executive board.

Next, the provisional agreement will be presented to member states’ representatives and the European Parliament for approval.

Click here to read the full press release

Why this matters to your credit union: While this story focus only on the European Union, it demonstrates how national-level regulators are continuing to evolve their approaches to combating money laundering and terrorist financing proliferation,  Expect other jurisdictions to take note of their approach.   

Andrew T. Price, Esq.
Sr. VP of Advocacy
World Council of Credit Unions (WOCCU)
99 M St., SE, Washington, DC 20003 USA
Office: +1-202-843-0704 | Mobile: +1-850-776-5699 |

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