Credit unions are asking the Federal Reserve to define who will supervise anti-money-laundering controls before it gives more eligible financial institutions a streamlined route to its payment services. The request puts the operating risk behind the policy debate in plain terms: direct access can increase speed and competition, but automated rail controls do not replace institution-level supervision.
In a July 28 summary of its comment letter, America's Credit Unions said the Fed should specify concrete Bank Secrecy Act and AML safeguards, including the supervisory framework for nontraditional account holders, and then reissue the proposal for public comment. The group supports preserving statutory eligibility standards and called the proposal's credit-risk limits sensible, while warning that operational risks need continued attention and specialized supervision.
What the Fed is proposing
The Federal Reserve proposal would create an optional, special-purpose “Payment Account” for institutions already legally eligible to maintain an account at a Reserve Bank. It would be used to clear and settle the institution's payment activity, rather than function as a full master account.
The proposal would allow access to services including Fedwire Funds, FedNow and the National Settlement Service, subject to the account terms. Holders would receive no intraday credit or discount-window access, earn no interest on Reserve Bank balances and use payment services with automated controls designed to prevent overdrafts. A Reserve Bank would set a closing balance limit based on the institution's expected payment flows, with the proposed ceiling generally capped at $1 billion.
Those restrictions reduce credit and balance-sheet risk. They do not answer every question about how an account holder identifies customers, monitors transactions, reports suspicious activity or manages an incident that travels across interconnected payment services.
The dispute is about the control perimeter
The Fed says the proposal would not expand legal eligibility and that Reserve Banks would expect account holders to mitigate illicit-finance risks. America's Credit Unions is asking for more specificity before finalization: which regulator owns continuing oversight, which BSA/AML standards apply to different business models and how the framework will remain consistent across Reserve Banks.
The Independent Community Bankers of America raised a parallel concern in its July 27 response. ICBA asked for mandatory illicit-finance requirements, transparency and public reporting, and argued that institutions outside the bank prudential framework should not receive equivalent access without equivalent guardrails.
The trade groups do not take identical positions. America's Credit Unions supports several of the proposal's limits and focuses on specifying supervision; ICBA wants any program to be temporary and expresses broader opposition to direct access for lightly regulated firms. Their overlap is still significant: payment-rail controls and zero-credit terms are not a substitute for a clearly assigned supervisory regime.
What credit unions should model now
The immediate task for a credit union is not to change its FedNow connection. The proposal remains under review. But payment, treasury, BSA and vendor-management teams can use it as a scenario for assessing dependencies on fintechs or processors that may eventually seek direct Fed access.
Start by mapping which partner originates the instruction, holds the customer relationship, screens the parties, monitors velocity and files any required report. Then identify which controls sit at the partner, the credit union, a processor or the payment rail. A service may prevent an overdraft while still allowing a suspicious transaction to move if customer due diligence and behavioral monitoring are weak.
Contract and due-diligence questions should cover the partner's legal eligibility, primary supervisor, BSA officer, sanctions and transaction-monitoring responsibilities, independent testing, incident notification and evidence retention. They should also address how the credit union would restrict or terminate access if the partner's Reserve Bank status changed.
Operational testing matters because direct access can change the path and speed of settlement. Teams should model a partner outage, a frozen or limited account, an exceeded closing balance limit and a fraud event that requires rapid recall or coordination. The exercise should assign decision rights before a live incident and distinguish a rail-level rejection from an institution-level compliance escalation.
A faster rail still needs accountable institutions
The proposal could reduce reliance on intermediary banks for eligible firms and support new payment products. It could also alter where credit unions encounter settlement, liquidity, third-party and illicit-finance risk. The final design will matter not only to applicants for Payment Accounts, but to insured institutions connected to them through member payments, vendors and correspondent relationships.
For credit-union executives, the practical takeaway is to track the control perimeter rather than the label on the account. Before relying on any new direct-access partner, require a documented chain of supervision, monitoring, incident response and accountability. Our FedNow implementation analysis and payment-fraud control review offer related guidance for real-time operations and shared fraud responsibilities.