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Timing for Checking OFAC on Loans
Answer by Andy Zavoina, BOL Guru
Guru BIOS
Question: We do the check for OFAC when the loan is settled. This is done automatically by our software when the loan is opened in the system. Is this OK or should we do it after the loan application is taken? We do a daily search agains the OFAC list on all new accounts and a monthly complete file check. Lenders are complaing that it takes 5 to 7 minutes to imput the data or add the potential loan customers to the system after the application is taken. We do have the capability of adding the customers (s) to the system after the application is taken even though the loan is not disbursed until settlement.
Answer: If you settle (which I read as sign and disburse) the loan and then check the list, what do you do if there is a hit? The payments they make to the bank may end up in quarantine and not against the balance you are owed. And some blocked funds require you to pay interest on them. Talk about insult to injury.
They should be checked prior to closing as you don't want to execute the transaction without verification.
First published on BankersOnline.com 1/5/04
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