If a loan customer requests an extention of credit, and states that they will purchase farm equipment with the proceeds- and then does not name the Bank on the collateral- would you consider opening up an investigation and potentially filing a SAR for Loan Fraud?

Most definitely if the dollar amount exceeds $5,000 (and I can't imagine that it would not). If it becomes apparent that the borrower simply missed a step in error, and fixes it right away, you can weigh that in your decision -- was it fraud or a simple mistake?

John, let me ask you this- if during the course of originating a loan, the customer does not produce all proper documentation requested, including recent financial statements- would you say that activity would lead to open an investigation,,, and potentially a SAR?

Not necessarily <although I'm not John>; however why would you originate the loan without the recent financial statements?

And I have a question. If you loaned him money to buy farm equipment, why would you not have made sure you had a security interest in that collateral yourself rather than relying on him? It should have been the bank's responsibility, not his, jmho.

It's been a while since I've done any lending (I decided I had a hard time saying "No!"), but I don't think that failure to provide all the requested documentation for underwriting (such as financial statements) would call, per se, for a SAR investigation. Some people don't have current financials, some don't want to give out the information (even though they know it will be asked for by a lender). But if anything in the documents turns out to be fraudulently omitted or misstated, I'd get my SAR pencil and notebook out.

Georgia Plum- no one is saying the LO didn't make a mistake- it is general practice to perfect the loan. Having said that the LO no longer works for the Bank, and we can not question the LO as to why this happened. What I am trying to determine is, if this happened to you- would you jump to the conclusion that the borrower is indeed engaging in suspicious activity-

I don't find this specific instance as a Red Flag, as defined by the FFIEC.