Skip to Content

Translate | Disclaimer

Banking Department Issues Consent Order to Cease and Desist To Niagara Frontier Federal Employees Credit Union

State of New York Banking Department


In the Matter of
NIAGARA FRONTIER
FEDERAL EMPLOYEES
CREDIT UNION: 
Niagara Falls, New York

Order Issued
Pursuant to
New York Banking Law
Section 39
Upon Consent


WHEREAS, Niagara Frontier Federal Employees Credit Union (“Niagara Frontier”), located at 615 Main Street, Niagara Falls, New York 14301-1739, is a credit union corporation organized and existing under the New York Banking Law ("NYBL") and subject to the rules and regulations issued thereunder, as well as those of the National Credit Union Administration (“NCUA”); and

WHEREAS, the Superintendent of Banks of the State of New York (the "Superintendent") has supervisory and regulatory jurisdiction over Niagara Frontier; and

WHEREAS, David Birmingham, Lawrence Carr, Craig Drachenberg, Donald Fornalik, Keith Gilmore, Joel Malinverni, Michael Mertel and Diane Wiatr are members of the Board of Directors of Niagara Frontier (the “Board”); and

WHEREAS, Joseph Gariano, Pat Ruggirello and John Wiatr are members of the Supervisory Committee of Niagara Frontier (the "Committee"); and

WHEREAS, the New York State Banking Department (the "NYSBD") examined Niagara Frontier as of the close of business September 30, 2006 (the "Examination"); and

WHEREAS, the findings of the Examination established that Niagara Frontier is, and has been, conducting business in an unauthorized and unsafe and unsound manner, and identified certain supervisory concerns relating to the conduct of its business, including but not limited to:

  1. deficiencies relating to compliance with the applicable federal and state laws, rules and regulations relating to anti-money laundering (“AML”) policies and procedures, including the Bank Secrecy Act (31 U.S.C. § 5311 et. seq.); the rules and regulations issued thereunder by the U.S. Department of the Treasury (31 C.F.R. Part 103); the rules and the AML requirements of 12 C.F.R. § 748.2 (collectively, the “BSA”); and those of the NYSBD (3 N.Y.C.R.R. Part 300);
  2. inadequate accounting and reporting with respect to the reconciliation of the general ledger and subsidiary bank accounts;
  3. inadequate Board and Committee oversight;
  4. inadequate internal controls with respect to the allowance for loan and lease losses, the disaster recovery plan and the dormant account policy;
  5. apparent violations of federal laws and regulations, including 31 U.S.C. § 5318 (h), 31 C.F.R  § 103.100, and 12 C.F.R. § 748.2; and
  6. deficiencies noted in the prior examination that had not been corrected as of the close of the Examination.

WHEREAS, the Superintendent has determined that Niagara Frontier has failed to establish the controls, policies and procedures necessary to ensure that it operates in a safe, prudent and lawful manner; and

WHEREAS, the Superintendent possesses the authority under NYBL § 39 to issue an order to the credit union to discontinue unlawful, unauthorized or unsafe practices; and

WHEREAS, the Superintendent believes that prompt enforcement action is necessary to address the numerous supervisory concerns cited herein; and;

WHEREAS, on June 7, 2007, at a duly constituted meeting, the Board adopted resolutions:

  1. Authorizing and directing David P. Birmingham to enter into this Order on behalf of the Niagara Frontier and consenting to compliance by Niagara Frontier with each and every provision of this Order; and
  2. Waiving any and all rights that Niagara Frontier might have pursuant to NYBL § 39 with respect to:
    1. the issuance of a notice of charges and of hearing on any matter set forth in this Order;
    2. a hearing for the purpose of taking evidence on any matters set forth in this Order;
    3. judicial review of this Order; and
    4. challenging or contesting, in any manner, the basis, issuance, validity, terms, effectiveness or enforceability of this Order or any provision thereof.

NOW, THEREFORE, before the taking of any testimony or the making of any findings of fact or conclusions of law, and without this Order constituting an admission or denial of any allegation made or implied by the Banking Department in connection with this proceeding, and solely for the purpose of settlement of this proceeding without a protracted or extended hearing, and pursuant to the aforesaid resolutions,

IT IS HEREBY ORDERED, PURSUANT TO NYBL § 39:

Compliance with Laws and Regulations
  1. Within sixty days of the effective date of this Order, Niagara Frontier shall revise its BSA policies and procedures in order to reasonably ensure compliance with the BSA and the applicable regulation of the NYSBD. The BSA compliance program shall include, at a minimum:
    1. a system of internal controls to ensure ongoing compliance;
    2. an independent testing for compliance to be conducted once each calendar year by  credit union personnel not involved in the compliance function or by an outside party;
    3. the designation of an individual or individuals responsible for coordinating and monitoring day-to-day compliance; and
    4.  training for appropriate personnel.

After approval by the Board, the revised policies shall be submitted to the Banking Department.

  1. Within sixty days of the effective date of this Order, Niagara Frontier shall revise its policies regarding compliance with the regulations of the U. S. Department of Treasury, Office of Foreign Assets Control (“OFAC”) (31 C.F.R. Part 500) in order to reasonably ensure compliance with such regulations.
  2. Within ninety days of the effective date of this Order, Niagara Frontier shall complete an independent test of compliance with BSA and OFAC requirements, and prepare a report on the findings. Niagara Frontier may comply with this requirement by using qualified persons who are not involved in the function being tested and who do not report within the unit responsible for compliance with BSA and OFAC requirements. The review may also be performed by the Committee or be outsourced to a third party. The independent test should, at a minimum, include:
    1. an evaluation of the overall effectiveness of the BSA and OFAC compliance programs, including policies and procedures;
    2. appropriate transaction testing to verify compliance with BSA and OFAC recordkeeping and reporting requirements;
    3. an evaluation of management's efforts to resolve violations and deficiencies noted in previous examinations; and
    4. a review of staff training.

Management shall forward a copy of the findings of the test report to the NYSBD as soon as it is received.

Accounting and Reporting

The Board shall:

  1. Immediately secure the services of an accountant to perform a reconciliation of all bank accounts.
  2. Develop, prior to the filing of its next Call Report, a monthly reconciliation process to ensure that all general ledger accounts have supporting     documentation. The Board shall determine a reasonable time limit for resolving differences and shall monitor the process so that all open items are accounted for, and differences resolved, within this time frame.

Supervisory Committee

The Committee shall:

  1. Insure that an annual supervisory committee audit is conducted in a timely manner, and that an audit report is delivered within 120 days of the audit date, as required by NCUA regulation § 715.9.

Loan Underwriting/Administration

The Board shall:

  1. Immediately provide written disclosure regarding the loan prepayment penalty fee to all loan applicants, or otherwise remove the prepayment penalty requirement from the loan policy.
  2. Within sixty days of the effective date of this Order, ensure that the deficiencies noted in the automobile loans to John Ciccarelli and Ramon Romero are corrected. 

Internal Controls

The Board shall:

  1. Within ninety days of the effective date of this Order, provide for an independent review of the allowance for loan and lease losses (“ALLL”) methodology. Going forward, the Board shall review the ALLL methodology annually, as stated in Niagara Frontier’s ALLL policy.
  2. Within one hundred and twenty days of the effective date of this Order, perform a test of its disaster recovery plan.
  3. Within sixty days of the effective date of this Order, develop and implement a formal policy on dormant accounts.
Other Remedial Actions

The Board shall:

  1. Within thirty days of the effective date of this Order, develop, adopt, and implement a written action plan that addresses all recommendations made in this Order and in the report of examination as of September 30, 2006. The action plan should include time frames and the individual(s) responsible for the implementation of each recommendation.
  2. Monitor compliance with this Order and provide to the NYSBD monthly progress reports, describing the actions taken, or proposed to be taken, to comply with the terms of this Order. Such monthly progress reports shall be submitted to the NYSBD no later than ten days after the end of each month.
  3. Within sixty days of the effective date of this Order, update Niagara Frontier’s bylaws to include all recent amendments.
  4. Within ninety days of the effective date of this Order, review and approve all Niagara Frontier’s policies.  Going forward, the Board shall review and approve its policies on an annual basis, as mandated by its bylaws.

General Provisions

  1. All communication regarding this Order shall be sent to:

          Manuel Kursky
          Deputy Superintendent of Banks
          New York State Banking Department
          1 State Street
          New York, New York 10004-1511

          David P. Birmingham
          President
          Niagara Frontier Federal Employees Credit Union
          P.O. Box 182
          Niagara Falls, New York 14302-0181

  1. This Order shall not bar or estop the NYSBD or any other state or federal agency from taking any additional action with respect to Niagara Frontier or any of its officers, directors or employees.
  2. This Order shall become effective immediately upon execution of the last signature required below.

By Order of the Superintendent, dated this 22nd day of June, 2007.

Signed: David P. Birmingham
Niagara Frontier Federal Employees CU
Printed: David P. Birmingham, President
Print Name and Title                

Signed: Manuel Kursky
Manuel Kursky
Deputy Superintendent of Banks
New York State Banking Department

About DFS

Contact DFS

Reports & Publications

Licensing

Laws and Regs

Connect With DFS

DFS Facebook page

Follow NYDFS on Twitter