A recent report by the World Council of Credit Unions (WOCCU) has found that global credit union membership has surpassed 400 million. The Association of British Credit Unions (ABCUL) reported that for the third consecutive quarter, credit union membership in Britain has increased and reached a record level of almost 1.5 million.
However, my conversations over the last year indicate that many Credit Unions are underestimating the risks associated with money laundering and financial crime. Despite serving a more limited member base and narrower geographic focus, credit unions must comply with the same anti-money laundering (AML) and financial crime regulations as larger financial institutions, which often have vast dedicated compliance, AML and fraud teams.
The Vulnerability of Credit Unions
Credit unions, often operating with limited resources and relying on volunteers, to provide essential services to their communities. Unfortunately, this can create a perception among money launderers that smaller financial organisations lack robust AML processes, making them attractive targets for financial crime.
Compliance with AML and financial crime regulations is resource-intensive and can divert attention from member services. As the volume of transactions increases, so do the vulnerabilities in any manual processes used to detect financial crime. Credit unions, with fewer financial resources than larger banks, face significant impacts and reputational damage from penalties or fines for non-compliance.
Efficiently Mitigating Financial Crime Risks
Some financial crime controls are non-negotiable for all regulated firms.
- Regular Risk Assessments: Identify emerging or evolving risks specific to credit unions.
- Comprehensive Compliance Policies: Ensure policies are regularly reviewed, documented, and consistently applied by all staff, including volunteers.
- Continual System Reviews: Regularly update systems and controls to meet regulatory requirements.
In conducting their risk assessment, some firms may conclude that to adequately protect both the credit union and its members from financial crime, automated controls should be implemented.
How Automated Solutions Can Help
Implementing automated customer screening and transaction monitoring can save time, reduce errors, enhance compliance, and alleviate the burden on smaller teams.
Automated solutions like Jade ThirdEye can significantly enhance your credit union's ability to detect and prevent financial crime. With an extensive rules library and the capability to create bespoke rules, credit unions can tailor monitoring to their specific risks. Examples of transaction monitoring rules include:
- Loan Overpayments: Detect significant overpayments beyond contracted amounts.
- Transaction Structuring: Identify multiple transactions across accounts or timeframes that collectively amount to high-value transactions.
- Test Payments: Identify small withdrawals from recently opened accounts, which can be a precursor to larger fraudulent deposits and might indicate money mule activity.
- Unusual Withdrawals by Vulnerable Members: Detect unusual withdrawals by elderly or vulnerable members, potentially indicating exploitation.
Suspicious Withdrawals: Monitor withdrawals just under typical monitoring thresholds, which can indicate APP frauds or money mule activity.
Comprehensive Customer Screening with Jade ThirdEye
Jade ThirdEye also enables Credit Unions to configure ongoing customer screening, using sources like Dow Jones and World-Check, tailored to your credit union's risk profile. This includes screening for:
- Special Interest Persons (SIPs) and Special Interest Entities (SIEs), including those listed on official Sanctions Lists
- Politically Exposed Persons (PEPs)
- Relatives or Close Associates (RCAs)
Individuals convicted or on trial for serious crimes such as fraud or drug trafficking
Case Management
Jade ThirdEye Case Management provides seamless case creation directly from suspicious alerts or straight from a customer. It enables credit unions to undertake full AML and financial crime investigations into suspicious customer behaviour, upload evidence and provide an accumulated record in one central place.
Suspicious Activity Reporting
Jade ThirdEye ensures that responses to suspicious alerts are fully documented, providing an audit trail necessary for raising a suspicious activity report (SAR) or conducting detailed reviews.
Learn More
Discover how Jade ThirdEye empowers credit unions globally in our latest case study or find out how to build a business case for a new financial crime monitoring system.
Stay ahead of financial crime risks and ensure your credit union remains compliant and secure. Contact us today for more information.
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