We are looking at purchasing a loan from a non bank entity. In this situation would we have to conduct CIP on the entity we are purchasing the loan from and/or the actual borrower on the loan?

I would think CIP on the borrower only.

(ii) Account does not include:

(B) An account that the bank acquires
through an acquisition, merger,
purchase of assets, or assumption of
liabilities;

That said, if your CIP Policy states that you will conduct CIP on borrowers of purchased loans, you'll need to do so. You've stated that the loan is being purchased from a "non-bank entity". Unless that entity is also required to comply with regulatory requirements, I'd think you'd want to perform CIP on your new customer, anyway.

What would give you the right to demand that these customers come in and give you the information that you need or how many would even bother? I can't imagine any bank specficially including purchased accounts in their CIP.

You're absolutely right, Rick. This purchased loan would not be considered an account under the Patriot Act. Irregardless, if TooTall's CIP Policy says they conduct any CIP on acquired acocunts, they have to comply. I don't believe I suggested that they demand the customer (only one loan was mentioned) come in in order to fulfill any CIP requirements. It's quite possible that the non-bank entity the loan is being purchased from already has all required info, and TooTall could just reverify it to obtain a comfort level that the info provided by the seller of this loan is accurate. BTW, we actually do have a section in our CIP Policy regarding "Acquired Customers" which states that we require the seller to certify that they have complied with all the specific requirements of Section 326 for all accounts opened after 10/1/2003. Our policy further states that we will conduct due diligence on all acquired accounts opened after 10/1/2003, attempt to obtain any missing information, and incorporate said accounts into the Bank's overall risk assessment.

IMHO - You are boxing yourself needlessly in a corner. Things are difficult enough without making up additional requirements. Such a certification from the seller is useless. What are they certifying or warrantying against? It's a waste of paper.

Well, our CIP Policy was established before I came on board, but I would imagine that the decision to require a certification for Acquired Customers (defined in our CIP as account purchases or loan participations) was probably influenced by the certification included in Section 326 requirements relating to reliance on another financial institution (to perform any/all CIP requirements). Our participation loan agreements also include a CIP certification; examiners usually ask to see it and are happy it's there. Waste of paper? Not IMO.

I guess my real question was this, " On a purchase of a loan "does the CIP exemption apply when the loan is purchased from a non-bank entities"?

Thanks for your responses.

The exemption applies regardless of who the seller is.

Many believe that CIP does not apply to purchased loans because it is assumed the originating bank performed CIP. That is incorrect. The language quoted above is not predicated on an assumption, it simply says CIP does not apply.

CIP would not apply even if that statement was not there: The borrower is not opening an account at your bank.

Regardless of BSA concerns, your underwriting should firmly establish and document the identity of the borrower. As for the originator, your concerns do not revolve around CIP, but whether the entity or individual is properly owed the funds and is legally capable of transferring the debt to you.

Thanks for you responses.