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#1993492 - 02/04/15 08:42 PM Former customers & CIP
Red Raiders Offline
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Compliance Land
Wanted to throw this out there:

Let's say a borrower has a car loan at the bank and applies for a home loan on 1-5-15. Processor starts process, pulling credit and completes red flag checklist 1-9-15 and marks that borrower is current customer so CIP is not required. Borrower pays off car loan on 1-12-15. Home loan closes on 1-30-15 with no new CIP ran.

We have an issue here, right? He ceased being a customer on 1-12-15 and we should have treated him like a new customer and ran CIP before 1-30-15 is my thinking. I don't think it matters that he was a customer when we started the application process but wanted to get opinions.
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#1993505 - 02/04/15 09:01 PM Re: Former customers & CIP Red Raiders
Doug Hendrickson Offline
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You would hope that an examiner would not get too picky, but, technically, based on a FAQ from 2004, I'd have to agree that at the time of the loan the borrower was not a customer:

2. Does the exclusion from the definition of “customer” in 31 C.F.R. § 103.121(a)(3)(ii)(C)
for a person with an existing account extend to a person who has had an account with the
bank in the last twelve months but who no longer has an account?
No, this provision only excludes from the definition of “customer” a person that at the time a
new account is opened currently “has an existing account with the bank,” and only if the bank
has a reasonable belief that it knows the true identity of the person. Therefore, for example,
when a person has a deposit account and subsequently obtains a loan, the person has an existing
account with the bank. Conversely, a person would not be deemed to have an existing account at
the bank if the person had a loan, paid it off, and twelve months later obtains a new loan.

In addition the FAQ states that:

Therefore, when the account is a loan, the account is opened when the bank enters into an enforceable agreement to provide a loan to the customer.
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#1993584 - 02/04/15 10:50 PM Re: Former customers & CIP Doug Hendrickson
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Originally Posted By: Doug Hendrickson


In addition the FAQ states that:

Therefore, when the account is a loan, the account is opened when the bank enters into an enforceable agreement to provide a loan to the customer.


Glad you mentioned this. How do you define "when the bank enters into an enforceable agreement to provide a loan to the customer"? I've always thought the applicant became a customer when the loan is closed, but am reviewing some new on-line BSA courses that indicate it's when the loan is approved. Any comments?
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#1993591 - 02/04/15 11:12 PM Re: Former customers & CIP Red Raiders
Doug Hendrickson Offline
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I would take it as when the loan is closed.

However, I think it's a quibbling point only because we are likely to have the four pieces of data before getting to either the approval or loan closing, assuming an application was completed and a credit report pulled.

For instance, our CIP form is generated by our loan origination software (LaserPro) at the time when the loan documents are prepared for closing. However, the CIP information was 'collected' long before that time as part of the process of ensuring that the person who is asking for the loan is who he/she purports to be, not specifically for CIP compliance.
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#1993630 - 02/05/15 01:26 PM Re: Former customers & CIP Red Raiders
rlcarey Online
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"into an enforceable agreement to provide a loan to the customer"

That would be a commitment letter.
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#1993890 - 02/05/15 07:12 PM Re: Former customers & CIP Red Raiders
Princess Romeo Offline

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In reading through this, Doug has a point - during the processing of a loan you ARE gathering the 4 data points required by CIP - it's now just a question of what verification process is required by your CIP program.

If your program only accepts documentary verification, then you will need to see the driver's license and record the issuer, number, issue and expiration date.

If your program allows non-documentary verification, my guess is you will have accomplished that via the credit report and credit underwriting process.
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#1994036 - 02/06/15 01:49 PM Re: Former customers & CIP Princess Romeo
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Thank you for your responses. We also gather CIP data prior to loan closing; that was not my question. Rather, it was at what point does a loan applicant become a customer? As I mentioned earlier, I thought it was when he/she signed the loan documents. To me, that's the "enforceable agreement". Randy stated it's the commitment letter.
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#1994045 - 02/06/15 02:12 PM Re: Former customers & CIP Cape Codder
Elwood P. Dowd Offline
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This is not responsive to the issues raised by the original poster.

Quote:
on-line BSA courses that indicate it's when the loan is approved.


You need to ask those folks where they got that, specifically. I do not think a contract is created when the loan committee or loan officer approves the credit. The first possibility is when the commitment letter is issued. If no commitment letter is issued, then it's at the loan closing where the borrower becomes obligated to repay.

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#1994237 - 02/06/15 07:10 PM Re: Former customers & CIP Elwood P. Dowd
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Thanks, Ken.
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#1994294 - 02/06/15 08:25 PM Re: Former customers & CIP Red Raiders
John Burnett Offline
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And thanks, Ken, for your extended "signature." Made my day.
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