Financial services are fraught with risk. Any service built around the exchange of money is going to get the attention of all sorts of ne'er-do-wells, from your average scammer to extremely advanced cybercriminal operations that are adept at hiding their tracks. A credit union must protect its members and their assets, and failure to do so will discredit your viability as a trusted institution. Fortunately, credit unions have the benefit of a network of advisory organizations to help educate and assist in the identification of threats. The right credit union technology can also provide advanced tools to detect fraud. Used in combination, these resources will help ensure you provide your members with the security they need and expect.
Here are some way a credit union can enhance their compliance and security:
- Member Due Diligence: It is fundamental to risk assessment to know who your members are. Have a 360-degree view of the member’s account to show transaction history, alerts, trending reports, case notes, and specific due diligence information about the member. Have a place to record all compliance and risk related information needed about your member. Maintaining visibility on transaction and transfer volume is a good practice to keep aware of suspicious activity. If there are a lot of unanswered questions, you need to ask yourself if this is worth the risk.
- Risk Rating: A custom risk rating matrix for your members enables you to set risk thresholds, values, and criteria by creating rule sets in a risk-rating model. Create as many risk models as needed for different account types, member types, geographies or services. Each risk criteria rule within the model assigns a score and the total score will determine if the member is above or below the threshold for review. Having on-demand access to the latest risk rating results from a dashboard report can help your credit union make better decisions.
- Cybersecurity Risks: Online banking, electronic document transfer, and e-Signatures can all add risk to your current operations if not managed properly. However, these technologies are tremendously beneficial to both member and CU when thorough security measures are in place, so it's worth incorporating them. Security is critical to success, and this is especially true when it comes to online transactions.
- BSA (The Bank Secrecy Act): The BSA was established in 1970 by Congress as the first laws that required banks and credit unions to assist the government in detecting and preventing money laundering. Stringent rules and requirements are placed on financial institutions to keep and provide detailed reports on member activity. Large financial fines or even losing your charter are at risk if you are not in compliance with this regulation. Your credit union technology partners should provide tools to ease the burden of staying compliant with BSA.
- AML (anti-money laundering): AML's are the set of procedures, laws, and regulations that comprise the BSA. They are designed to help banks detect and report suspicious activity when it comes to money laundering and terrorist financing, such as securities fraud and market manipulation. Core software initiates transaction processing, any decent credit union core software package will provide, at a minimum, base AML tracking.
- Transaction Monitoring: In tandem with AML, transaction monitoring technology is critical in assessing risk. It uses a type of artificial intelligence to read through all transactions as they occur and flag any activity that deviates from the "norm." Alerts can be triggered by all manner of transactions from cash deposits, to withdrawals, to foreign currency exchange. The key to this software's effectiveness lies in the rules each credit union sets to help it determine what is considered a deviation. This will vary by location, geography, type of credit union, etc.
- Watch list or OFAC: With the ever-changing world of politics, terror threats, and international crime, keeping up with the dynamic watch list of the Office of Foreign Assets Control can seem overwhelming. Yet, as a financial institution, it is crucial to not only the safety of your credit union, but to the safety of the world. That is a big responsibility for anyone's shoulders. Core systems should provide regulatory compliance for things such as OFAC, otherwise software costs can get out of hand.
Your core processor should provide you with right tools that will help your credit union monitor for risks and maintain compliance. However, it can't end there. While it is each credit unions responsibility to meet regulatory requirements, FLEX is one of the few core processors that has built-in tools to help credit unions stay compliant, at no extra cost!