Maybe this has already been addressed, but please help - Am I understanding the CIP rules correctly? If we have a current (existing) customer who, say, has a loan with us and he comes in to open up a checking account, then we have to perform CIP procedures on him again?

You need to see what your policy says in this regard. In general, the USA Patriot Act says that for an existing customer (another account currently open) you do not have to re-CIP him when another account is being opened if you have a reasonable belief that you know his identity.