#2192442 - 09/13/18 02:36 PM
Re: Student Loan and Reg Z Violation
Anonymous
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Power Poster
Joined: Sep 2010
Posts: 2,658
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I agree with others that you absolutely have to know the purpose for loans greater than $10,000. This is a BSA requirement.
To answer the OP's question on how to mitigate risk going forward, I would personally do two things. First, I would train on student loans so that I was sure everyone was clear in their understanding of the requirements and possible consequences of originating a student loan when the applicant expressly states it is for applicable purposes. Secondly, I would require a purpose on each non-real estate request, as Skittles stated. Further justification on this is that you must have the purpose (for BSA) when the amount is over $10,000. Because of this, it is just easier from a management perspective to require the purpose every time. Otherwise, errors will occur when lenders are trying to remember when they need to collect it and when they don't have to.
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Adam Witmer, CRCM All statements are my opinion, not those of my employer, and should not be taken as legal advice. www.compliancecohort.com
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#2192455 - 09/13/18 03:48 PM
Re: Student Loan and Reg Z Violation
Anonymous
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10K Club
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
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Just an observation, not all unsecured loans will you know for sure the use of funds
Then your loan officers are just application takers and not loan officers. Any, and I mean any, loan officer worth their salt will interview the applicant and determine the purpose of the loan proceeds whether it's a $500 loan or a $5,000,000 loan.
A loan customer can be scammed in the same manner as a deposit customer. If the applicant tells the loan officer they are borrowing $3,000 to send to the Irish Lottery Office to claim their $100 trillion winnings, would the loan officer make the loan?
As mentioned earlier, knowing the purpose of the loan is lending 101.
From a 2007 enforcement action.
$250,000 CMP Assessed
The International Bank of Miami, N.A., Coral Gables, Florida, is alleged to have violated the Bank Secrecy Act; to have engaged in unsafe and unsound practices when it failed to supervise adequately its Capital Markets Group (CMG); and to have failed to ensure that CMG's securities transactions were conducted safely, soundly, and legally. Specifically, the OCC's order alleges that the bank: • Violated the BSA and 31 CFR 103.33(a) [records of loan transactions] by permitting CMG to maintain records that frequently failed to adequately identify a legitimate business purpose for loans, or fully and adequately describe the nature and purpose of loans (loans were described merely as being for "working capital"). • Failed to maintain a system of controls to monitor and report suspicious activity. • Failed to adequately identify and monitor accounts of politically-exposed persons (PEPs). • Failed to monitor loans accounts and payments for suspicious activity. • Did not have an adequate training program on detecting and reporting suspicious activity. • Permitted CMG to make loans that did not conform to the bank's own lending policies, and to omit obtaining proper authorization for large credits. • Allowed CMG to provide incomplete or inadequate loan documentation and recordkeeping, not in accordance with bank policies. • Failed to do adequate customer due diligence, especially for high-risk customers. • Allowed CMG to maintain an inadequate record of its securities transactions. • Permitted OMG to engage in securities transactions in violation of OCC regulations. • Allowed CMG to conduct securities transactions with high-risk countries without risk management procedures.
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The opinions expressed are mine and they are not to be taken as legal advice.
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