KENNEWICK, Wash.—Endangered Small Credit Union Defense (ESCUD) is urging NCUA to ensure its proposed updates to anti-money laundering and countering the financing of terrorism (AML/CFT) rules deliver practical relief for smaller institutions, arguing that current examination practices often impose disproportionate burdens on low-risk credit unions.
In a comment letter submitted to the agency regarding Docket No. NCUA-2024-0033, ESCUD, which represents CUs below $500 million in assets, said it strongly supports the agency’s proposed changes to AML/CFT program requirements under 12 CFR 748.2.
NCUA has said its proposal appropriately modernizes the regulatory framework to align with the Anti-Money Laundering Act of 2020 by emphasizing a risk-based approach and distinguishing between establishing an AML/CFT program and implementing it.
ESCUD group said it especially supports language indicating that supervisory or enforcement actions should generally be reserved for significant or systemic implementation failures once a compliant program is in place.
Recurring Examination Concerns
According to the letter, small credit union CEOs continue to face several recurring examination-related concerns, including:
- Threats of Documents of Resolution (DORs) tied to minor, isolated or technical Bank Secrecy Act findings that do not amount to broader program failures.
- Pressure to file additional Suspicious Activity Reports (SARs) or create extensive documentation explaining why SARs were not filed in situations deemed clearly non-suspicious.
- Expectations for more complex and costly BSA training programs, including recommendations to use third-party providers despite simple operating models and low-risk profiles.
Conflict Cited
ESCUD argued those practices conflict with a true risk-based supervisory approach and contribute to regulatory fatigue that can accelerate consolidation and mergers among smaller credit unions.
The organization said the proposed rule could reduce those pressures if examiners consistently apply the framework in practice.
Recommendations Shared
Among its recommendations to the NCUA, ESCUD called for:
- Clear examiner guidance defining the threshold for “significant or systemic” deficiencies and limiting DORs for minor findings.
- Reinforcement that examiners should not pressure institutions to file SARs absent reasonable suspicion or require extensive documentation to justify not filing.
- Explicit acceptance of simple, in-house BSA training programs tailored to smaller institutions’ risk profiles.
- Greater reliance on independent CPA Agreed-Upon Procedures supervisory BSA audits to reduce duplicative examination work.
- Additional examiner training focused on proportionality, including streamlined risk assessments and lighter monitoring for low-risk institutions.
In its conclusion, ESCUD said small credit unions support BSA compliance and law enforcement objectives but need a supervisory environment that reflects their size, business models and member base. The group said the proposed rule is a step in the right direction and offered to provide additional examples, survey data and implementation feedback as the rulemaking proceeds.
About the Group
ESCUD said it has been endorsed by 32 small credit unions nationwide representing more than 100,000 members and more than $1 billion in assets.
