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#2156851 - 12/12/17 02:50 AM Beneficial Ownership NonDoc Verification
McFly Offline
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Considering the difficulty in obtaining authorization from a beneficial owner to pull a credit report in compliance with FCRA, what are some other non-documentary methods that banks are employing to verify BOCPs?
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#2156858 - 12/12/17 11:43 AM Re: Beneficial Ownership NonDoc Verification McFly
Elwood P. Dowd Offline
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From the supplementary information accompanying the original CIP regulation, circa 2003:

Thus, a bank need not establish the accuracy of every element of identifying information obtained, but it must do so for enough information to form a reasonable belief that it knows the true identity of the customer.

You are going to develop a beneficial owner identification program (BOIP) wherein you list acceptable identification from which you can verify as many of the 4 markers as you can. You will not be able to verify a name/TIN combination from a photocopy of a drivers license, but your BOIP will say that verifying 3 of the 4 provides you with a reasonable belief of the customer's identity.

Think of it as "CIP Lite;" i.e. just going through the motions.
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#2156902 - 12/12/17 04:09 PM Re: Beneficial Ownership NonDoc Verification McFly
Daisy Doodle Offline
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We have external auditors on site and the lead auditor is telling me the rule provides all the authority we need to pull efunds on beneficial owners. Goes against everything I've been reading here. He says the rule says 'full due diligence'. His interpretation of that is efunds is allowable. I haven't had time to go back and try to find the section he's referring to.

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#2156913 - 12/12/17 04:24 PM Re: Beneficial Ownership NonDoc Verification McFly
John Burnett Offline
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If efunds provides information that meets the definition of a consumer report under section 603 of the FCRA, then accessing efunds to verify the identity of an individual who's not going to be liable on an account would be a violation of the FCRA.
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#2156953 - 12/12/17 05:57 PM Re: Beneficial Ownership NonDoc Verification McFly
JacF Offline

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I think it is important to understand that eFunds is one of several inquiry tools offered by the same vendor, and often packaged together. Some of their inquiry platforms are consumer reports, subject to FCRA, and some are not. Bankers, auditors, and the like often get very confused about this suite of products, because we tend to use them, and thus perceive them, as a single unit.

EFunds (Chex Systems, Qualifile), to use the example noted above, is a consumer report. It is also not designed to satisfy the CIP requirement, since it does not verify the search subject's identifying information. Other tools by the same vendor can satisfy CIP requirements, without generating a consumer report.

If you research the inquiry services offered by other vendors, you'll find the same thing. Some are verification tools, some are consumer reports. It's up to us to know the difference and match the inquiry platform to the objective.

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#2157044 - 12/12/17 10:29 PM Re: Beneficial Ownership NonDoc Verification Daisy Doodle
Elwood P. Dowd Offline
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Quote:
the lead auditor is telling me the rule provides all the authority we need to pull efunds on beneficial owners.


Lead auditor scary person!

JacPCB is correct. Not every query generates a consumer report. I don't purport to be familiar with the menu of offerings from any vendor, but will suggest that it would be foolish to rely on a vendor's advice as to what does and what does not constitute a consumer report. If your bank might deny the opening of an account based on a report from a third party, then my broad conclusion would be that it's a consumer report and FCRA applies.

This is simply not a case where I would test the waters. As indicated above, there is no reason to if you can verify enough information from a documentary source.
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#2158146 - 12/21/17 09:17 PM Re: Beneficial Ownership NonDoc Verification McFly
jonv Offline
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We are utilizing Lexis Nexis Instant ID for non-documentary verification of our beneficial owners. Lexis Nexis Instant ID is not a consumer report as defined by FCRA.

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#2158147 - 12/21/17 09:17 PM Re: Beneficial Ownership NonDoc Verification McFly
jonv Offline
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We are utilizing Lexis Nexis Instant ID for non-documentary verification of our beneficial owners. Lexis Nexis Instant ID is not a consumer report as defined by FCRA.

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#2165429 - 02/22/18 03:34 PM Re: Beneficial Ownership NonDoc Verification jonv
lucyc Offline
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While reviewing the information for Lexis Nexis Instant ID it looks like this product verifies the name, consumer or business address, date of birth and social security or tax identification number. Since driver's license is not listed are your still obtaining copies of the driver's licenses? If so, are you running that information through Lexis Nexis Instant ID?

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#2171219 - 03/30/18 08:55 PM Re: Beneficial Ownership NonDoc Verification McFly
TheManofSteel Offline
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What about the Chexsystems module IDV, which is used only to verify identification? Would this also not qualify as a consumer report, even though Chexsystems is a Nationwide Specialty CRA?
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#2171228 - 03/31/18 11:43 AM Re: Beneficial Ownership NonDoc Verification TheManofSteel
Elwood P. Dowd Offline
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Quote:
Lexis Nexis Instant ID is not a consumer report as defined by FCRA.


I have no doubt that's what this vendor claims. Other vendors are obviously making similar claims. Yet, if the beneficial owner's ID is not confirmed by this report, are you going to deny the account on that basis? If so, isn't the individual (the one who is not even present) entitled to a turn down notice under FCRA because the information you used was provided by a third party?

This is a legitimate issue, but I'm honestly not certain BSA examiners will unearth it. I heard a BSA examiner described as a BSA "subject matter expert" tell a statewide audience that banks could pull a consumer report on beneficial owners. He was immediately corrected by audience members.

The point is, FCRA is reviewed in compliance exams. BSA is reviewed in safety and soundness exams. It's unrealistic to assume all safety and soundness examiners will recognize the issue; i.e. banks may be able to get by with it. Yet, as it is completely unnecessary to use non documentary verification, the point in trying escapes me.
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#2171236 - 04/01/18 08:05 PM Re: Beneficial Ownership NonDoc Verification McFly
J_G Offline
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We will be using the eFunds Identity Verification module.

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#2171277 - 04/02/18 02:20 PM Re: Beneficial Ownership NonDoc Verification Elwood P. Dowd
TheManofSteel Offline
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if it turns out that such services are deemed a consumer report, does not the fact that a federal law and regulation compels CIP of the beneficial owner satisfy the requirement of a permissible purpose under FCRA?
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#2171279 - 04/02/18 02:27 PM Re: Beneficial Ownership NonDoc Verification TheManofSteel
Elwood P. Dowd Offline
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Quote:
does not the fact that a federal law and regulation compels CIP of the beneficial owner satisfy the requirement of a permissible purpose under FCRA?


No. The FCRA spells out what its permissible purposes are...
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#2171907 - 04/04/18 06:49 PM Re: Beneficial Ownership NonDoc Verification McFly
Rangers Fan Offline
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If the banker is using ONLY FIS/eFunds "IDV" for the verification function (as well as OFAC that is built in), this search is not a debit/credit bureau inquiry if used by itself and appears to be acceptable for the BO verification.

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#2171923 - 04/04/18 07:49 PM Re: Beneficial Ownership NonDoc Verification Rangers Fan
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Originally Posted By Rangers Fan
If the banker is using ONLY FIS/eFunds "IDV" for the verification function (as well as OFAC that is built in), this search is not a debit/credit bureau inquiry if used by itself and appears to be acceptable for the BO verification.


This goes back to Ken's response in post #2171228. If you deny the account based on that check, its a consumer report, thus you need permissible purpose.
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#2171961 - 04/04/18 09:10 PM Re: Beneficial Ownership NonDoc Verification bcompliance
ColoradoAML Offline
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Originally Posted By bcompliance
Originally Posted By Rangers Fan
If the banker is using ONLY FIS/eFunds "IDV" for the verification function (as well as OFAC that is built in), this search is not a debit/credit bureau inquiry if used by itself and appears to be acceptable for the BO verification.


This goes back to Ken's response in post #2171228. If you deny the account based on that check, its a consumer report, thus you need permissible purpose.


I would think there wouldn't generally be a reason to outright deny an account based on information in this report, you'd just require supplementary information in order to validate the BO's identity (like documentary identification), then once they've provided it you could proceed. If they never provide it, you haven't denied the account, they just haven't finished the account application process.

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#2172102 - 04/05/18 04:32 PM Re: Beneficial Ownership NonDoc Verification McFly
CountryBanker Online
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Searched but didn't find feedback on this scenario, I know my Loan Ops folks will want to try this, since the BO Cert will be created in the loan origination system for those new accounts.

Can a credit report pulled during an active loan application be used for non-doc verification?

Would think you should NOT go peek at it days, weeks or months after the loan closes.
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#2172119 - 04/05/18 05:37 PM Re: Beneficial Ownership NonDoc Verification CountryBanker
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Originally Posted By CountryBanker
Can a credit report pulled during an active loan application be used for non-doc verification?

Would think you should NOT go peek at it days, weeks or months after the loan closes.


What aspect of the credit report would you be reviewing for non-doc verification? Are you just verifying a SSN, DOB, Name match?

I don't see where there would be any problem with that.
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#2172123 - 04/05/18 05:54 PM Re: Beneficial Ownership NonDoc Verification CountryBanker
Elwood P. Dowd Offline
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The consumer is an applicant or guarantor, not just a beneficial owner?
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#2172131 - 04/05/18 06:36 PM Re: Beneficial Ownership NonDoc Verification McFly
CountryBanker Online
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RC, yes, credit report we use contains name match, SSNo, DOB, and usually a good address. It's one more source besides a state D/L or ID which lacks the SSNo. Loan Ops will use the CBO generated by the loan origination software, and I'm thinking they'll want to get what's required on the CBO out of the way right away, and the credit report has what's needed. They'll worry about what's needed for complete CIP (gov't ID w/ pix) later.

Was your question intended for me or the Rock, K_P ?
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#2172140 - 04/05/18 07:03 PM Re: Beneficial Ownership NonDoc Verification CountryBanker
Elwood P. Dowd Offline
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You.
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#2172177 - 04/05/18 09:42 PM Re: Beneficial Ownership NonDoc Verification McFly
CountryBanker Online
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Let's say Joe & Bob, Dad's sons, form a business J&B Harvesting where they will use Dad's combine and tractors & tenders. They're in their 20's and to make the Loan Officer feel more secure on the $20,000 startup LOC, we ask Dad to guarantee the loan in addition to Joe & Bob.

I can get enough from the credit report to initially fill out the CBO for loan applicants Joe & Bob (50/50). Dad, as guarantor, is not our customer (and not BO). But in a high percentage of deals, we pull credit for all guarantors. So it's there.

I can also visualize the scenario where Dad would hit the control prong (hey, kids, you can't use my combine & equipment except on these days...). So even though he's just a guarantor, he'd hit one prong. Oh look, we have BO info from his credit report.

Does that help, if I understand your question, K_P?
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#2172178 - 04/05/18 09:48 PM Re: Beneficial Ownership NonDoc Verification McFly
Daisy Doodle Offline
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Maybe I'm 'underthinking' your situation but I would call this a partnership and just get Joe and Bob's info. It doesn't make Dad a 'control person' if he controls when they use his equipment...I would equate that to them renting equipment somewhere and having to reserve or schedule it likewise. Now if Dad is booking their jobs, that's another matter.

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#2172181 - 04/05/18 10:08 PM Re: Beneficial Ownership NonDoc Verification McFly
CountryBanker Online
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It takes time to go through the customer base and find real situations, but they are out there in my 6 banks. I understand your point.
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