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#1922709 - 05/13/14 04:37 PM Suspicious loan activity
ABT Offline
Junior Member
Joined: Nov 2010
Posts: 32
After reviewing a customer's checking account activity, it appears that loan proceeds were used for a different purpose than what the loan was applied and approved for. Does this activity require a SAR to be filed?

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BSA/AML/CIP/OFAC Forum
#1922821 - 05/13/14 07:26 PM Re: Suspicious loan activity ABT
renniks Offline
Diamond Poster
renniks
Joined: Sep 2003
Posts: 2,162
New England
This is loan fraud; I would file a SAR.

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#1922824 - 05/13/14 07:31 PM Re: Suspicious loan activity ABT
BSAmic Offline
New Poster
BSAmic
Joined: Apr 2014
Posts: 6
Illinois
Was it extremely different than anticipated?
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#1922828 - 05/13/14 07:37 PM Re: Suspicious loan activity BSAmic
ABT Offline
Junior Member
Joined: Nov 2010
Posts: 32
Yes it was extremely different than anticipated.

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#1922918 - 05/14/14 10:08 AM Re: Suspicious loan activity ABT
Elwood P. Dowd Offline
10K Club
Elwood P. Dowd
Joined: Aug 2001
Posts: 21,939
Next to Harvey
The BSA regulation requires banks to obtain a "statement of purpose" for loans in excess of $10,000 not secured by real estate. It should be descriptive enough to allow a reviewer to "chase proceeds;" i.e. compare what the applicant said to what the borrower did. If the lie would have affected your bank's decision to make the loan it's a "false statement" and could be classified as fraud. The type of fraud would depend on the purpose of the loan; e.g. business loan, consumer loan, etc. You will either file a SAR or document why you did not.

That's the easy part.

You need to sit down with the borrower and present him with what you know. Depending on the facts and the language in your note and security agreement, one possible result of that conversation would be that your bank calls the loan. Depending on the circumstances, continuing to list the credit on your balance sheet at 100 cents on the dollar could be considered as misrepresenting your income statement.

Filing a SAR never represents a cure of the underlying problem.
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