Boomermom,
There is a residual issue from the decision to make the loan that may come back to you and you need to figure out how you are going to handle it.

Your bank was required to get a TIN. For the sake of argument, you did. However, when you attempted to verify it, it turned out to be unissued. The CIP regulation requires (D) A description of the resolution of any substantive discrepancy discovered when verifying the identifying information obtained. In short, the law requires you to document how you "resolved" the discrepancy; there is no provision for ignoring a discrepancy.

There are two possible interpretations here: a)the bank did not get a TIN as the law requires or b) the bank failed to resolve a discrepancy as the law requires. Since the loan was made anyway, the violation appears to be willful.

It's anyone's best guess as to how hard the agencies will push on an individual rather than systemic violation under CIP, but there is no question that they can push as hard as they want. At a minimum, have an inspriational conversation with your lender. Remember, whatever your policy says, it was adopted by the Board and I doubt that it gives individual lenders the authority to waive legal requirements.

Bank's who sell their mortgages need to be very careful here. If you find out after the fact that an SSN was not valid (not yet issued, duplicate of another person's number, etc.) you have a fannie/freddie/HUD issue and need to consider the requirements. You will probably have to buy the loan back.

This brings up one other interesting dilema when it comes to CIP and loans:

If you cannot resolve discrepancies and the loan has now been made, how to you close the account?

If it's a revolving line, you can freeze the account (and for HELOCs, I guess you have to use the "fraud or material misrepresentation escape clause to stay in the good graces of Reg Z) , but you still have the outstanding balance that you cannot just "close" since you need to make some collection efforts.

Likewise on a closed end loan, the money is out the door, so you don't just "close" the account since presumably you have to call the account due and collect the balance. But what about contract issues if your note and disclosure? Has anyone added CIP discrepancy as an event of default?

Although you have until the loan closes to do CIP, it isn't practical. It needs to be integrated into the decision process and those verifications shouldn't be closing table surprises.

Andy, you know that, we know that and our policies say that, but try telling that to a lending officer who for 20 years has been doing things another way. To them CIP is just a hassle and if there is a problem takes too much time when the customer is in your office and you have others waiting.

That means you will have to do something to obtain his understanding, agreement, and attention. Such as making sure the board or his supervisor (depending on how high he is in the food chain) takes action and makes it clear that failing to observe the rule in the future will constitute an offense worthy of [name your sanction here].

Unfortunately, John, this is the Sr. Lender.

One of two things comes to mind initially, 1) a side discussion informing the sr. lender that we all want to follow policy, it is there because of the law and we don't want to explain these violations in the BSA discussion of our next exam, or 2) get a higher up to do this, even if it is your examiner's in the next exam. They can always indicate, "looks pretty good, but we do see... which is disturbing". Obviously if this is a real issue and cite-able you'll let them find it first even if it is in your workpapers.

That's why I had the documentation added that the loan officer decided to approve the loan anyway. Covering tracks on the other end. Until one of them gets stuck with a penalty what I say has no bearing - I'm not one of them. I'm just the Compliance Officer and I just look for things to cite them for! I have no authority over bank officers.

"I have no authority over bank officers."

This situation is one that cries out for a policy decision by the bank now. What are the bank's expectations - do they want to make loans to individuals with invalid SSNs (probably no), what do they want to do to protect the bak against this happening again, and what do they want to do when these cases turn up after a loan is booked. To just wait and let more and more pile up is very risky. I would recommend to the powers that be that they do just that and set a policy in place with clear instructions for lenders and others. If the bank then chooses to ignore my advice, well..I have gone on record and need to make my personal decisions if this type of thing keeps happening.

Do you have bank counsel you can get involved or another highly placed ally?

Hopefully you meet independently with the Director's Audit Cmte or the Board. This is an area where you can say "and this is an area we have BSA exposure in...". Prior meetings with this group should have demonstrated to them the recent emphasis, both in rules and penalties, the importance BSA has. This may cause the BSA emphasis to roll downhill.

You may say that this person also attends or is on one of these committees. So be it. You have a responsibility as a bank officer. This is business, not personal. You tried to avoid this and resolve it by other methods.

I don't envy you, but it is a time when you can actually see your authority grow, if handled right, to meet your responsibility.

Quote:

---

"I have no authority over bank officers."

---

I'm sure this is probably true, but a BSA compliance officer is supposed to have the authority to make and enforce BSA policy. I remember the following being pointed out to me. It came from a Financial Institution Letter from FDIC.

"The designation of an individual or individuals to be responsible for coordinating and monitoring compliance with the Bank Secrecy Act. To meet the minimum requirement, each bank must designate a senior bank official to be responsible for overall BSA compliance. Other individuals in each office, department or regional headquarters should be given the responsibility for day-to-day compliance. The title of the individual responsible for overall BSA compliance is not important; however, the level of authority and responsibility within the institution is. The senior bank official in charge of BSA compliance should be in a position, and have the authority, to make and enforce policies. A "BSA Officer" who reports to a senior official would not be sufficient to meet the requirements unless the senior official is officially designated as the officer in charge of overall BSA compliance".

Again, I'm sure your statement about lack of authority is probably correct, but when and if the BSA compliance is criticized by examiners, I am sure you will have full authority to take the blame.

First, let me state I am Compliance Officer in name only. I am not a bank officer nor am I the BSA Officer. I am just put in charge of writing things like the CIP Program, training and helping implement. I have to audit, keep my notes, etc. We have not Audit Committee and I do not meet with the board. We are a smaller family-owned bank and do not have the same structure as larger corporate institutions. And in cases like this, I can only make recommendations and document that the final decision was made by the lending officer. Thanks for everyone's concern and input.

I originally posted this thread to alert everyone and hopefully educate how to tell if a SSN has been issued. The customer had the documentation but it couldn't be verified.

It's good to know I'm not alone. Doesn't make our job easy though, does it?