CUs: FinCEN Must Work with Regulators on ‘No-Action Letter’ Process

Credit union groups stress need for coordination between FinCEN and fellow regulatory authorities in establishing protocol.

Credit unions and their trade groups applauded the Financial Crimes Enforcement Network (FinCEN) for proposing a “no-action letter” process but warned that it would be unfair if the NCUA and other regulators were not parties to that process.

“A no-action letter from FinCEN loses its value if other regulatory authorities are not aware of it,” wrote Aminah Moore, NAFCU's senior regulatory affairs counsel, in a letter to FinCEN officials. “It would be a waste of a credit union’s resources to apply for a no-action letter and have it be approved only to then have the activity penalized during an examination by its prudential federal regulator because the regulator did not know that FinCEN had approved the activity.”

Background to the Issue

Congress required FinCEN officials to study whether a no-action letter process might be helpful to financial institutions, which could apply for and receive a safe-harbor assurance from the agency.

In June, FinCEN submitted its report to Congress, recommending the implementation of that process. The agency then issued a Notice of Proposed Rulemaking seeking comments on the initiative.

Credit Union Response

The issuance of a no-action letter could create regulatory uncertainty if other agencies are not even informed of such a document, the Risk and Compliance Department at IH Mississippi Valley Credit Union in Moline, Illinois, told the agency.

“If it is not considered by the NCUA and state regulators, then this will create confusion on who financial institutions should receive guidance and recommendations from,” credit union officials told FinCEN.

No-action letters could clarify some of the issues that credit unions face in filing required reports, David Pace, manager of regulatory advocacy at the League of Southeastern Credit Unions, wrote in a comment letter.

Pace said that FinCEN cooperation with the Justice Department could be particularly helpful. He added that it also would be important that FinCEN officials work with the NCUA.

“A credit union may cease filing a report based on what is stated in a no-action letter, the National Credit Union Administration or a similar state entity may come along later and see that the credit union ceased filing the report for the specific case specified in the no-action letter and could theoretically act against the credit union even if shown the no-action letter,” he wrote.

A CUNA official agreed, telling FinCEN that the agency should work toward increased cooperation with agencies, including the NCUA and state credit union regulators. Elizabeth Sullivan, the organization’s senior director of advocacy and counsel, also went a step further, suggesting that FinCEN officials enter into a formal Memorandum of Understanding with other regulators regarding the weight and significance of no-action letters.