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WOCCU: Tweaks To Int'l AML Guidance Would Ease CU Burden
WASHINGTON (4/30/13)--Allowing more flexible prepaid card use and increasing the de minimis threshold for conducting customer due diligence on small value remittance transfers are two ways the Financial Action Task Force's (FATF) draft anti-money laundering guidance could help relieve credit union regulatory burden and promote financial inclusion, Michael Edwards, World Council of Credit Unions vice-president and chief counsel, wrote in a Monday comment letter.

The FATF is developing updated guidance on international anti-money laundering standards for politically exposed persons (PEPs) and new payment products and services (NPPS). The NPPS guidance could be released as early as this summer, and was one of many issues addressed when Edwards spoke on behalf of credit unions at a FATF meeting in London last week.

Updated guidance expanding the definition of PEPs to include domestic PEPs and international organization PEPs is also expected later this year. Under prior FATF definitions, only foreign politicians and foreign high-level bureaucrats were considered PEPs. WOCCU in the letter commenting on the draft NPPS anti-money laundering guidance supported the FATF's approach in general, but urged several technical changes to the NPPS guidance. The suggested changes address:
  • Emphasizing a weighing factor analysis for assessing the risk of money laundering and terrorist financing (ML/TF) for electronic payments;
  • Allowing simplified anti-money laundering consumer due diligence measures in order to promote financial inclusion of the unbanked; and
  • Not considering usage of prepaid cards as a bank account alternative to be a high ML/TF risk.
Many credit unions offer NPPS such as prepaid debit cards, mobile payments, workers' remittances and Internet-based payments to their members "in order to provide their members with useful and convenient payment services and to promote financial inclusion of unbanked individuals," Edwards wrote.

Specifically, he added, credit unions in countries such as Guatemala, Haiti, Kenya, Mexico and other countries in Latin America and Africa use NPPS such as mobile payments and money transfer organization systems "to provide their predominantly rural and poor members with payment services that they would not otherwise have access to." Small credit unions in Great Britain, the United States and other countries "offer their members prepaid cards as an alternative to a current account either because the credit unions do not have the economies of scale necessary to implement full-service current accounts cost effectively or because some members prefer to use prepaid cards as a money management tool," Edwards added.

While credit unions usually provide these services to credit union members that have undergone background checks, the services are, in some cases, provided to non-members. The services are provided to these non-members to help attract unbanked individuals to credit union membership and promote financial inclusion, Edwards wrote.

For the full WOCCU comment letter, and a release on the issue, use the resource link.
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