According to the travel rule we must transmit certain information in with a wire over a certain dollar amount. For a bank paying off another bank on behalf of the customer (for a refinance loan), it appears that the wire originator is the person and not the bank. Is this consistent with your belief?

(v) Originator. The sender of the first payment order in a funds transfer.
(w) Originator's bank. The receiving bank to which the payment order of the originator is issued if the originator is not a bank or foreign bank, or the originator if the originator is a bank or foreign bank.

(1) Recordkeeping requirements. (i) For each payment order that it accepts as an originator's bank, a bank shall obtain and retain either the original or a microfilm, other copy, or electronic record of the following information relating to the payment order:
(A) The name and address of the originator;
(B) The amount of the payment order;
(C) The execution date of the payment order;
(D) Any payment instructions received from the originator with the payment order;
(E) The identity of the beneficiary's bank; and
(F) As many of the following items as are received with the payment order: 1

Yes, the originator of the wire is the customer, not the FI.

Agree.

What about in the case of a participation.

We have purchased a small percent of a participation which is a line of credit. Bank A is the main bank and we are bank B. The customer wants some money. Bank A tells us to send them some money.

So we conduct a wire on behalf of the customer (is that a stretch) to bank B for our portion of the new extension. Are we the originator and the originating bank, or is the customer the originator? Does anyone have any citations for this that I could use as support?

Thanks much.

Make it a trio of agreement.

The customer signed the note. The customer signed the security agreement. The money you are wiring is the borrower's.

Only your original post was there when I responded and I think your A's and B's got stirred up in the second. I cannot offer you any citations, but neither will anyone who disagrees with you. If you are doubtful, call the Helpline.

In this case, which is different than disbursing loan proceeds, this is the bank's money that is being wired. You have no relationship with the customer.

I think the participation question is ripe for debate. In the participations/syndications that I've seen; the participating bank has a loan record for the ultimate borrower, and any payment they send to the main bank is intended for the ultimate borrower, and usually has reference data tying it to the borrower (otherwise the main bank would have no way to correctly apply the funds received from the participating bank.)

In my opinion, the characterizing it as a bank-to-bank transfer works to obscure the role of the borrower, a third party.

Typically, the participation agreement is with the other bank and regardless of how you set up the participation on your system, if the borrower draws on their loan or makes a payment, any settlements with the other bank has nothing to do with the customer. You are purely honoring your contract with the other bank.

If you have an agreement directly with the customer, it would be totally different.

and herein lies the debate. The participation agreement is an agreement to lend funds to a third party. It is not an agreement for banks to transfer funds on their own behalf.

Well, all participations might be a little different, but most of the ones that I have read have nothing to do with the underlying borrower. The borrower in many cases has no knowledge of the fact that a bank has participated a portion of their loan to another bank.

Agreed as long as you are not the lead bank.

This might be true, but is irrelevant. It's whether the bank knows the funds are for the borrower that controls.

I disagree here, I agree with Randy and others, in the case of the participation, it's a bank to bank wire. The customer has no authority to wire funds from you. The bank is the one making the wire request.

actually, in most cases it is an agreement that Bank B (and possibly Bank, C, Bank D, etc) purchases a portion of a loan from Bank A (usually because Bank A would exceed their lending capability if funding the entire amount)...the borrower has an obligation to pay bank A per the loan agreement...Bank A has an obligation to pay Bank B for the portion of the funds that Bank B provided. I have seen cases where the borrower knew the loan was participated out, and other cases they didnt. If the borrower knew and the loan was drawn so that each participant was listed as a lender, that could change how the payments are made.

It depends.