Monetary Instrument Logs (MIL) is a record that tracks transactions that use monetary instruments. These instruments include things like checks, money orders, traveler's checks, and cashier's checks.
MILs should be a core component of your credit union's compliance strategy. Maintaining legal and regulatory compliance is essential, as it helps preserve the financial stability of your organization.
In order to remain compliant with the Banking Secrecy Act, your credit union needs to utilize MILs.
MILs serve as a documentation tool to track applicable transactions. These logs help prevent money laundering, which is one of the key purposes of the banking secrecy act.
Likewise, BSA compliance requires your credit union to report all suspicious transactions to the appropriate authorities and MILs are a part of this reporting process. They also help in keeping your organization in line with the BSA's Customer Due Diligence requirements.
Given the fact that criminal fines of up to $250,000 or five years in prison (or both) can be assessed for certain types of compliance and regulatory violations, it's easy to see why this is important in a larger sense. However, understanding what MILs are on a fundamental level is the key to embracing why they matter so much on a daily basis.
MILs should cover not only member transactions involving cash, but also cash equivalents. This includes but is not limited to checks, money orders, or traveler's checks in amounts ranging from $3,000 to $10,000.
It is important to understand the challenges that monetary instrument logs pose to your credit union so you can proactively take measures to reduce the friction. Keep reading to find out what you may face with MILs.
One major challenge of MILs has to do with how specific the requirements are. Not only is attention to detail essential, but consistency across MILs is as well. This can be very time-consuming, so make sure to plan enough time to take care of this compliance requirement.
As MILs are a part of compliance and regulatory requirements, it's important to note that the rate at which these requirements change is also often seen as a challenge. Staying in the loop requires you to be proactive, which can be costly and again time-consuming.
Due to all of the above, there is always the possibility of human error. If MILs are inaccurate, they're not only less valuable to help combat things like money laundering—you could find yourself non-compliant as well.
One of the most important best practices for MILs involves the performance of regular internal audits. This will help verify the accuracy and completeness of your MILs.
Creating a set of clear and standardized documentation procedures can help reduce human error and the segregation of duties can prevent fraud and further errors as well.
This is also another one of those situations where your technology will directly contribute to your overall success. Using electronic systems to maintain logs will help to make sure that everything is not only secure but backed up regularly as well. It's also something that directly complies with data protection regulations, making it one less thing you need to worry about. This will have an impact on things like your reconciliation procedures, retention policies, and your larger compliance monitoring efforts.
At FLEX, we understand that compliance-related matters take up a tremendous amount of time. We want to help you address these challenges, focusing less on compliance so that you can spend more time on developing relationships with your members. We've authored a helpful Compliance eGuide that we hope does exactly that, which you can read by clicking the button below.