We complete a customer due diligence questionnaire at account opening for deposit accounts but are having a difficult time deciding how to apply to oan customers. How do other institutions handle risk rating their loan customers? What if the borrower is 2 LLCs which consists of 6 individuals - who do you risk rate? Do you use a questionnaire and if so, who completes it?

Seeking ideas!

Thanks.

from my Risk Assessment:

• NOTE: Due to the fact that the Bank’s underwriting standards are high and loans require a detailed analysis of the customer/business activity, loans do not require a BSA/AML risk assessment to be completed at time of opening. CD secured loans and loans paid down with cash are reviewed on a regular basis.

That's the general path we are taking. Have the Examiners and BSA audit been okay with this approach?

Yup ... been through 2 DFIs, 1 FDIC, 1 FRB & 4 Audits (used this approach at 2 different banks)

as long as you have other ways to monitor loan activity & you're confident that "the Bank’s underwriting standards are high and loans require a detailed analysis of the customer/business activity"

We just had our State Exam last week and our policy states the same as newbsa and it was not acceptable. Noted in our exit as a recommedation and did not help our overall BSA score.

The explanation we received is, "This is a new regulatory environment, and things are changing."

That is what happens when untrained State examiners come to the bank.

Or you could do like we do and require the loan customer open an account so the due diligence can be conducted there. The customer may maintain a low balance or it may be a CD but 99% of our loan customers are also a deposit customer. In addition, we also have an automated AML system that we do a quarterly risk rating of the entire database.

I like the open a deposit account idea - had not thought of that one and in this economic environment, increasing deposits is a very good thing.

NewTooBSA, do you risk rate at the customer level or account level? We were rating at the customer level, and recently changed to account level to ensure we rate accounts with different activity appropriately.

We rate at account level when opening the account using the type of expected activity,occupation/business type and several other key questions to help determine the rating.
Once the accounts are entered into the AML software then they are rated at customer level on a quarterly basis by tying all the accounts with the same name and reviewing the actual activity conducted.

More then likely from the NYSBD.