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#2038537 - 09/15/15 03:39 PM Property Management/Rental Income
PrimeTime Offline
100 Club
Joined: Nov 2014
Posts: 173
Looking to get some insight regarding the monitoring and level of due diligence associated with "property management" companies as well as consumer customers that deposit rental income.

It sort of dawned on me today that we have some customers in the property management industry, however we don't have information regarding how many properties they own, locations, etc., which I would consider to be quite the flaw as far as CDD/EDD is concerned. We also have consumer customers who from time to time deposit a mix of cash/checks (containing "rent" on the memo line), and again, no supporting documentation that says how many properties owned, locations, etc. In a perfect world I'd love to have all that information, however I'm assuming that as with anything I request there can and will be kickback, so I was looking to cite the examples of some other FI's and what their practices are, or some examiner comments that some have received in regards to this. I'm just thinking how easy it could be to say "yeah, I own some properties, but they're in low income areas so I collect cash because I don't trust the tenants", without actually owning any property as a nice little ML scheme. I understand that without obtaining actual documentation of the ownership of the properties it would still be speculative, but at least a number of properties and MAYBE a location would allow for enhanced monitoring of these customers.

Any input is much appreciated!
Life is like a bicycle. To keep your balance, you must keep moving.
-Albert Einstein


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#2038544 - 09/15/15 03:57 PM Re: Property Management/Rental Income PrimeTime
ACBbank Offline
Power Poster
Joined: Jul 2006
Posts: 4,297
New York City
For property managers who wish to open a transaction account, we request a copy of their rent roll to support their account activity. We don't require leases unless they are looking for a loan or the account activity is suspicious. I'm not sure why you would get any push back on this item. To be quite honest, the business people should already have it in their possession.

I don't know how concerned I would be about a person who deposits one rental check per month into their personal account. I've seen this quite often and as long as they have a single property and the following account activity isn't suspicious, I've been fine with it.
"100 victories in 100 battles isnt the most skillful. Subduing the other's military w/o battle is the most skillful." Sun-Tzu

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#2038545 - 09/15/15 03:57 PM Re: Property Management/Rental Income PrimeTime
Daisy Doodle Offline
Diamond Poster
Joined: Feb 2014
Posts: 1,030
Southern U.S.
I've struggled with this myself in 2 different banks. And that was just the conversation about requiring a business account at all (which does open the door wider for EDD). There were plenty of discussions about how many properties would make it a business. I would comment that if the cash was that small I wouldn't have been alerted. In some cases, I was able to win the day and get a business account opened, but each one was a struggle. Many of these were long time customers and long time activity which doesn't make it any easier. The business units did not consider this any kind of problem at all.

I wanted them in business accounts so they alerted on business thresholds and I wouldn't see them as much, or maybe not at all (assuming the cash did not trip the structuring wire--which sometimes it did). I would expect most of the cash and other rental income to be concentrated in the first week or 10 days of the month, if the landlord has a traditional first of the month rent structure.

As for money laundering, that to me was less likely than tax evasion at least for me. If you choose, you can search your local tax records to see how many properties they own, plus you should hopefully see multiple property tax payments and other indications of landlord activity--repairs and plumbers etc. If you don't see any of this, your risk would increase.

I've never had an examiner comment on the landlord situation.

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