A six-month report to Congress by the inspector general of the federal agency that charters and regulates credit unions gives a few details of the circumstances surrounding three credit union liquidations conducted from last December through this March.
In its recent report covering the period of Oct. 1, 2021, through March 31, 2022, the National Credit Union Administration (NCUA) Office of Inspector General (OIG) showed that the estimated loss to the National Credit Union Share Insurance Fund (NCUSIF) resulting from the three credit union failures amounted to a little more than $1 million in the aggregate, but fraud was suspected in two of the cases and poor compliance with Bank Secrecy Act (BSA) requirements was found in the third.
The liquidated institutions were Portsmouth Schools Federal Credit Union (alleged fraud), Prairie View Federal Credit Union (alleged fraud), and Empire Financial Federal Credit Union (BSA inadequacies, including failure to file numerous reports).
The Federal Credit Union Act requires the OIG to conduct a material loss review (MLR) of an insured credit union if the loss to the NCUSIF exceeds $25 million and an amount equal to 10% of the total assets of the credit union at the time when assistance was initiated or a liquidating agent appointed. As none of the three noted above met that loss threshold, limited-scope reviews were conducted instead.
The OIG report also looks at the progress being made (or lack thereof) on recommendations to agency management in connection with previous OIG audits, recently enacted legislation, and audits planned or underway.
One audit in progress now, the report states, is intended to determine whether the NCUA: (1) adequately reviews compliance with the Bank Secrecy Act (BSA) during credit union safety and soundness examinations, (2) issues timely formal or informal enforcement actions to address BSA-related violations, (3) tailors enforcement actions to address deficiencies identified during the supervisory process, (4) follows up on reported BSA violations to ensure credit unions take appropriate corrective action before closure of the violation, and (5) appropriately refers significant BSA violations and deficiencies to the Department of Treasury.
NCUA OIG Semiannual Report to Congress (Oct. 1, 2021-March 31, 2022)