We know that "working capital" is not acceptable as the purpose of a loan but I'm not sure how specific we need to be on personal loans. I'm reviewing a customer's questionable cash activity and noticed the explanation "help family member with personal expenses" on a loan application. Is that sufficient or do we need more info?
Thanks for your help!

I'm not aware of any official guidance. My "rule of thumb" is that the statement of purpose should be adequate to allow a third party to trace proceeds; i.e. verify that the customer did what he said he was going to do with the money. Yours would seem adequate to that purpose.

For example, if you look at the account to which the proceeds check was deposited and see a check to a family member or several checks paying off miscellaneous bills with "family member's name" on the memo line you can conclude he did what he said he would do. If you one big check payable to a local Chevy dealership as a down payment, not so much.

It's an imperfect mechanism. In the short run, its value is dependent on a bank policy that requires proceeds checks either be payable to a third party or deposited to an on-us checking account.

Thanks, Ken. I like the policy of depositing the disbursement check into the account of the loan customer. In this case, he cashed the check, so unfortunately, it's untrackable.