Although many Credit Unions have a more limited member base and narrower geographic focus,
they must still comply with the same AML/CFT regulations as larger financial organisations that may have teams of compliance officers dedicated to fighting financial crime.
Credit Unions often have limited resources, relying on volunteers in some cases to provide a much-needed service to the community. There can be a perception by money launderers that smaller financial organisations may not have the same robust AML processes as larger organisations, making them vulnerable to the risks of money laundering and financial crime.
Compliance with AML/CFT regulation can be onerous, taking precious resources away from serving members’ needs. As the volume of transactions, each Credit Union processes increases so do the vulnerabilities in any manual processes used to detect financial crime. Most Credit Unions have less financial resources than larger banks and may find significant impact and reputational damage from penalties or fines for non-compliance.
How can Credit Unions efficiently mitigate the risk of Financial Crime for both the Credit Union and its members?
- Regular risk assessments are imperative to identify emerging or evolving risks specific to Credit Unions.
- Compliance policies should be regularly reviewed, documented and consistently applied by new, current and volunteer staff.
- Continual review of systems and controls to ensure they remain adequate to meet regulatory requirements.
- Implement automated customer screening and transaction monitoring to save time, prevent errors, provide a greater level of compliance and alleviate some of the burdens on smaller teams.
How can an automated solution like Jade ThirdEye work in practice to protect members?
Credit Unions can pick from an extensive rules library or create entirely bespoke rules with their own thresholds, percentages or amounts that suit specific risks identified by their risk assessment. Here are some examples of transaction monitoring rules that can be created to monitor and alert staff to suspicious activity and protect and identify vulnerable members.
- Loan overpayments – to identify significant loan overpayments over the contracted repayment amount.
- Structuring of transactions - to identify multiple transactions over many accounts and/or timeframe connected to the same individuals which collectively amount to a high-value transaction and may otherwise go undetected.
- Elderly or vulnerable customers making unusual withdrawals - to identify customers who may be being exploited by family members or doorstep fraudsters.
- Test payments - recently opened accounts making small withdrawals. Fraudsters often wish to withdraw any seed money used to fund a sleeper account to ensure the account isn’t blocked. Detecting this can alert that an account is about to receive a large deposit.
- Unusual withdrawals - monitoring for withdrawals just under what many perceive as typical monitoring thresholds. In several cases, this alerted organisations using Jade ThirdEye to APP frauds. (Fraudsters tricking their victims into willingly making large transfers to them. For example, they may pose as someone from your Credit Union, or another trusted organisation, claiming you have been a victim of fraud and say you need to move your money to a different bank account.)
Jade ThirdEye enables Credit Unions to configure watchlist screening from Dow Jones and Refinitiv World-Check in line with their organisation’s risk profile and define the scope of customer screening, how often it takes place and which lists they are screened against. In this way, Jade ThirdEye can alert staff to:
- Politically Exposed Persons (PEPs)
- Relatives or Close Associates (RCAs)
- Special Interest Persons (SIPs)
- Special Interest Entities (SIEs)
- Other individuals who are convicted, arrested or undergoing trial for a financial or serious crime such as fraud or drug trafficking.
Jade ThirdEye allows users to document responses to alerts leaving an audit trail should it be needed to raise SARs or to conduct detailed reporting for review.
Find out more about how Jade ThirdEye is empowering Credit Unions across the globe in our latest case study.
*Source: Bank of England Credit Union Annual Statistics 2020 and ABCUL