What is a Credit Union?

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Questions and Answers

What is the primary difference between a credit union and a traditional bank?

Range of services offered

Type of customers served

Size of operations

Profit motive (correct)

What is a typical requirement for membership in a credit union?

Minimum account balance

Referral from an existing member

Credit score

Shared characteristic or affiliation (correct)

Which of the following services are credit unions typically not equipped to provide?

Checking and savings accounts

International branch operations (correct)

Wealth management

Mortgage loans

How do credit union members control the institution?

Through a democratically elected board of directors Signup and view all the answers

What is a benefit of choosing a credit union over a conventional bank?

Lower fees Signup and view all the answers

What do credit unions adhere to in terms of regulatory guidelines?

Similar standards as traditional banks Signup and view all the answers

What is unique about the governance structure of credit unions compared to traditional banks?

Board of directors is democratically elected Signup and view all the answers

What is the primary reason why credit unions are required to implement AML and CFT regulations?

Because they are financial institutions, as identified by the Financial Action Task Force Signup and view all the answers

Which of the following is NOT a characteristic of credit unions that makes them less susceptible to money laundering?

Complex operations Signup and view all the answers

Why do small credit unions find it easier to monitor transactions and report suspicious activities?

Due to their limited size and simpler operations Signup and view all the answers

What is the primary reason why credit unions may accept individuals who do not meet conventional bank eligibility criteria?

To provide access to banking services to underserved populations Signup and view all the answers

What type of documentation may serve as verification for individuals who lack proper identification?

A letter from an employer or educational institution Signup and view all the answers

What is the primary function of Credit Union Centrals?

To support individual credit unions by providing crucial services Signup and view all the answers

Which of the following services is NOT provided by Credit Union Centrals?

Financial auditing services Signup and view all the answers

What is the primary benefit of Credit Union Centrals to individual credit unions?

Leveraging pooled resources and collective bargaining Signup and view all the answers

Study Notes

Credit Union Overview

A credit union is a non-profit, member-owned financial institution governed by its customers, who are referred to as members
Credit unions provide various financial services and products, similar to banks, but typically on a smaller scale

Membership and Governance

Membership is based on shared characteristics, such as employment, affiliation, or other linked associations
Members control the institution through a democratically elected board of directors, deciding on policies, interest rates, and financial plans
Credit unions are known for their democratic style of governance, which sets them apart from traditional banks

Benefits of Credit Unions

Exclusive membership conditions
Customized personal services
Higher returns on investments
Lower fees
More favorable terms on loans

Regulatory Guidelines

Credit unions adhere to similar standards as banks in areas like liquidity, risk management, and documentation
They are obligated to implement AML and CFT regulations, overseen by entities like the National Credit Union Administration in the U.S.
Credit unions need to enforce stringent AML/CFT policies due to their specific regulatory demands

Credit Union Centrals

Credit Union Centrals support individual credit unions by providing crucial services, beneficial for both commercial and not-for-profit goals
Services include collective product strategies, back-office services, capital liquidity assistance, and legislative advocacy
Additional services include staff training programs, credit card processing, printing and office supplies, ATM network management, and shared service facilities

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Description

A credit union is a non-profit, member-owned financial institution providing various financial services and products to its members.