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Administrative Order: In the Matter of the Cease-and-Desist Order of Phi Beta Sigma Federal Credit Union

Administrative Order: In the Matter of the Cease-and-Desist Order of Phi Beta Sigma Federal Credit Union
First Name
Phi Beta Sigma Federal Credit Union
Last Name
Phi Beta Sigma Federal Credit Union
Phi Beta Sigma Federal Credit Union
District of Columbia
Docket Number


The National Credit Union Administration Board ("NCUA Board"), by and through its undersigned Regional Director, and Phi Beta Sigma Federal Credit Union ("the Credit Union" or “Phi Beta Sigma”) hereby stipulate and agree as follows:

  1. Consideration.  The NCUA is of the opinion that grounds exist to initiate an administrative cease and desist action against the Credit Union pursuant to Section 206 of the Federal Credit Union Act, 12 U.S.C. § 1786.  The Credit Union, without admitting that said grounds exist (except those set forth as to jurisdiction in paragraph 2), desires to avoid the time, cost and expense of administrative litigation.  Accordingly, the Credit Union consents to this Stipulation and Consent to Cease and Desist Order (“Stipulation”) and subsequent issuance by the NCUA Board of a Cease and Desist Order ("Order").
  2. Jurisdiction.
    1. The Credit Union is an "insured credit union" within the meaning of the Federal Credit Union Act, 12 U.S.C. § 1786(e).
    2. Pursuant to the authority vested in the NCUA Board under Section 206 of the Federal Credit Union Act, 12 U.S.C. § 1786, and 12 C.F.R. §747, it is an appropriate Federal agency to maintain enforcement proceedings against such an insured credit union.  Therefore, the Credit Union is subject to the authority of the NCUA to initiate and maintain proceedings against it.
  3. Consent.

    Effective September 5, 2019 the Credit Union will:
    1. Ensure the lists of subjects and businesses periodically published by the Financial Crimes Enforcement Network (FinCEN) pursuant to Section 314(a) of the USA PATRIOT Act of 2001 (Patriot Act) are cross-checked against the Credit Union’s membership records within the specific timeframes required by law, by September 30, 2019.  31 C.F.R. § 1010.520.
    2. Develop and implement written Bank Secrecy Act (BSA) procedures and internal controls, ensuring the Credit Union complies with BSA provisions, 12 C.F.R. §748.2, by October 31, 2019.
    3. Develop written procedures to follow the Credit Union’s Office of Foreign Asset Control (OFAC) Policy to check all parties to transactions against the OFAC Specifically Designated Nationals (SDN) list prior to completing the transaction, 12 C.F.R. §748.2(c)(1), by December 2, 2019.
    4. Administer BSA training to all Credit Union officials and staff, 12 C.F.R. §748.2 (c)(4), by October 31, 2019.
    5. Develop and implement a recordkeeping system to properly document the identity of all current Credit Union members and retain physical copies of these records, in accordance with Article II of the Credit Union Bylaws, and the Customer Identification Program (CIP), 31 C.F.R. §103.121, by November 30, 2019.  This same process must also be used to screen and confirm the identity of every future potential member.
    6. Immediately maintain and preserve Credit Union records in accordance with 12 C.F.R. § 749, Appendix A.  This includes all manual and electronic records, including those prior to the FedComp core data processing conversion.
    7. Review and reconcile the Vizo Corporate account and Industrial Bank account.  Record any necessary correcting entries to the affected Credit Union general ledger accounts by November 29, 2019.  Going forward, ensure monthly reconciliations are completed by the 20th of each month, document the date of outstanding items, the name of the preparer, and the date of reconciliation.  Incorporate an independent review by the supervisory committee.  Research and resolve the unexplained debit balance of ($23,547) in the undivided earnings general ledger account by September 30, 2019.  Provide written, supporting documentation for the resolution by September 30, 2019.
    8. Ensure the Allowance for Loan and Lease Losses (ALLL) methodology calculation complies with Generally Accepted Accounting Principles (GAAP) by October 30, 2019.  Fund the ALLL in as required by 12 C.F.R. §702.402.
    9. Engage an independent qualified professional, acceptable to NCUA’s Eastern Regional Director, to complete an opinion audit of the credit union’s records, 12 C.F.R. §715.12(a), covering July 1, 2017 through June 30, 2019, by October 15, 2019.  The audit must be completed and delivered to the supervisory committee by December 31, 2019.  This constitutes a waiver of the 120-day time frame required by 12 C.F.R. 715.9(c)(6).
    10. Engage an independent qualified third party, acceptable to NCUA’s Eastern Regional Director, to complete a verification of Credit Union member accounts as required by 12 C.F.R. § 715.8 by December 31, 2019.  Follow up on any accounts requiring alternative procedures by January 31, 2020.
      1. Obtain training from a qualified independent third party for all members of the supervisory committee in their roles and responsibilities.  Document evidence of the training.
      2. Establish a meeting schedule, no less than quarterly.  Maintain minutes of the meetings.  Include a list of attendees, subjects of discussion and updates to the annual audit work plan in the Supervisory Committee meeting minutes;
      3. Enhance the internal control review plan to indicate the committee member responsible for performing the identified internal control review.
      4. Document the completion of the internal control reviews. Include the individual who performed the review, the date it was reviewed, the results of the review, and maintain work papers of the areas reviewed for review by the NCUA and external auditors;
      5. Perform periodic reviews of file maintenance and supervisory override reports as part of your internal control review plan.  Document the follow-up on management's resolution of examination and audit concerns; and
      6. Provide summary reports to the board of directors regarding activity performed. Inform the board of directors of management's progress addressing examination and audit concerns.
    11. Engage a qualified independent third party, acceptable to NCUA’s Eastern Regional Director, to complete an Automated Clearing House (ACH) audit as required by National Automated Clearing House Association (NACHA) guidelines Article One Subsection 1.2.2, by December 31, 2019.
    12. Immediately discontinue underwriting new loans until credit committee members receive appropriate training and comply with the board approved loan underwriting guidelines in accordance with 12 C.F.R. § 701.21(c).  Contact the Eastern Regional Director in writing when you have taken the steps outlined in the Document of Resolution (DOR) and you want to resume the activity.
    13. Document all collection efforts of delinquent loans and ensure prompt follow up on all promises to pay by October 30, 2019.  Pursue all legal remedies available to collect on your loans.
    14. Submit an Approval of Officials package for all new officials in accordance with 12 C.F.R. § 701.14, prior to appointing an individual to serve in any capacity of the credit union.  Submit a package for William Frasier to serve on the credit committee by October 15, 2019.
    15. Enhance the business continuity/disaster recovery plan to address all requirements in accordance with 12 C.F.R. § 749 Appendix B, by December 31, 2019.
    16. Conduct the annual meeting of the members in accordance with 12 C.F.R. §701 Appendix A, Article IV, by December 31, 2019.
    17. Provide the Credit Union’s NCUA District Examiner with the Credit Union's monthly financial statements, to include monthly balance sheets, income statements, delinquency and charge-off reports, and monthly board meeting minutes for each month by the 20th of the following month, starting with the August 2019 statements, and each month thereafter.
  4. Modification.  The Credit Union and the NCUA agree that the above items in the preceding paragraph will remain in effect unless modified in writing by the NCUA Eastern Regional Director.  The Credit Union agrees that any such modification shall constitute an amendment to the Order and shall be fully enforceable by NCUA.
  5. Waivers.  The Credit Union waives its right to an administrative hearing to the Cease and Desist Order as provided for in Section 206 of the Federal Credit Union Act, 12 U.S.C. § 1786.  It further waives its right to seek judicial review of the Cease and Desist Order or otherwise challenge the validity or legality of the Order.
  6. Finality.  The Cease and Desist Order will be issued pursuant to Section 206 of Federal Credit Union Act, 12 U.S.C. § 1786.  Upon its issuance by the NCUA Board, it shall be a final Order, effective and fully enforceable by the NCUA.

WHEREFORE, in consideration of the foregoing, the undersigned, on behalf of the NCUA and the Credit Union, execute this Stipulation and Consent to Cease and Desist Order.



Eric Gilliam, BOD President /s/

Name & Title






By:  Jane A. Walters
Regional Director, Eastern Region



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