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#2091832 - 08/05/16 02:38 PM Participation Loan Deposit Account??
Red Raiders Offline
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Red Raiders
Joined: May 2013
Posts: 1,069
Compliance Land
Hoping someone can help and also that I explain this correctly.

We purchased a portion of a participation loan from another bank (that is not in our area). The customer and collateral is in our area and is actually blocks away from one of our branches. The lead bank wants us to open a deposit account so that the customer can deposit checks (apartment building) and cash since we are so close to the customer. Those deposits would be sent ACH to the lead bank whenever the balance in the account exceeds a certain threshold. The account would be in the name of the customer for the benefit of the lead bank as the lead bank has a lien on all rents. The customers is agreeable to all of this. Also, the customer would not have the ability to make any withdrawals from the account even thought he account is in its name.

Has anyone seen anything like this?

Who is our customer for CIP (i assume the apartment building owner since the account is in its name)?

I might have more follow up questions depending on the answers.
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General Discussion
#2091840 - 08/05/16 02:53 PM Re: Participation Loan Deposit Account?? Red Raiders
Dog Lady Offline
Member
Joined: Dec 2015
Posts: 74
This is just a controlled account. We don't generally take control of accounts at other banks, usually they are brokerage or our own COD account. Usually, we only control for Assignment of Account, but I suppose it also makes sense to control for assignment of rents.

I could EASILY see us requiring or doing something like this. (including sending balances above a certain amount out). What you described above is basically how controlled accounts act... the owner of the account cannot make withdrawals without written permission of the lienholder... Sometimes there are other restrictions. Just make sure you have a control agreement in place executed by you, the other institution and the customer. If you don't already have a standard one, get your legal counsel involved.

Side note: are you going to charge for those wires out to the other bank? Just something to consider and maybe to outline in the control agreement.

As for CIP, I would guess the customer, but I am in NO way a BSA expert so don't rely on my judgment.

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#2091848 - 08/05/16 03:01 PM Re: Participation Loan Deposit Account?? Red Raiders
Red Raiders Offline
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Red Raiders
Joined: May 2013
Posts: 1,069
Compliance Land
Thanks for the response. I know there is an agreement that will be signed between the lead bank, us and the customer. Not sure of all of the specifics but I know one exists. In your experience, do you know who would need to be a signer on the account? Generally, the customer who opens the account would dictate the authorized signers but I didn't know if this would be different since the lead bank is basically "running the show" and there will be no withdrawals allowed by the customer.
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#2091909 - 08/05/16 04:47 PM Re: Participation Loan Deposit Account?? Red Raiders
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 83,219
Galveston, TX
The account will be governed by the agreement and not your typical deposit account agreement and signature card.
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