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#2241914 - 09/02/20 12:38 PM BSA and PPP Loans
Audit123 Offline
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My audit question is; Do the FAQ#18 from the Paycheck Protection Program (PPP) Loan allows the bank to skip the Customer Due Diligence (CDD) process for existing customers if the CDD was previously completed?

18. Question: Are PPP loans for existing customers considered new accounts for FinCEN Rule CDD purposes? Are lenders required to collect, certify, or verify beneficial ownership information in accordance with the rule requirements for existing customers?

Answer: If the PPP loan is being made to an existing customer and the necessary information was previously verified, you do not need to re-verify the information.

Furthermore, if federally insured depository institutions and federally insured credit unions eligible to participate in the PPP program have not yet collected beneficial ownership information on existing customers, such institutions do not need to collect and verify beneficial ownership information for those customers applying for new PPP loans, unless otherwise indicated by the lender’s risk-based approach to BSA compliance.

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Audit
#2241918 - 09/02/20 01:27 PM Re: BSA and PPP Loans Audit123
rlcarey Offline
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Galveston, TX
I think the Q&A pretty much answers your question. What is your confusion?
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#2241919 - 09/02/20 01:34 PM Re: BSA and PPP Loans Audit123
InFairness, CRCM Offline
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InFairness, CRCM
Joined: Nov 2010
Posts: 568
USA
FAQ #18 appears to permit skipping CDD on current customers where CDD has been previously completed. This is why many PPP lenders focused their efforts on current customers.

That said, looking at some of the fraud issues being identified and the requirement that lenders conduct a good faith review of certain borrower representations, I would want to be sure my CDD processes were in good shape.

Preliminary Analysis of PPP Loan Data

PPP Loans Worth Billions at Risk for Fraud
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#2241923 - 09/02/20 02:16 PM Re: BSA and PPP Loans rlcarey
Audit123 Offline
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Joined: Sep 2008
Posts: 12
I have three issues with it. 1) Why will the rule specifically require the bank to follow applicable BSA requirements and then state you don't have to complete customers due diligence. 2) How does the bank know if the risk profile for any of these business clients have changed since the last CDD was completed? 3) Our BSA program specify that the bank will conduct a CDD on all new loan accounts.

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#2241924 - 09/02/20 02:20 PM Re: BSA and PPP Loans Audit123
InFairness, CRCM Offline
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InFairness, CRCM
Joined: Nov 2010
Posts: 568
USA
I think we all know the rule was not smart from a CDD perspective, but it is the rule the SBA implemented in the interest of speeding access to stimulus funds in a very trying time. However, if your bank's rules require CDD, you may wish to ensure CDD is updated on all PPP borrowers.
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#2241925 - 09/02/20 02:21 PM Re: BSA and PPP Loans Audit123
rlcarey Offline
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rlcarey
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Galveston, TX
Because they aren't your loans. You are no more than a conduit to get them into the marketplace and the servicer. Speed was the driving factor to get the loans out the door. They really were not that concerned about fraud on the front-end. That now is for the SBA to deal with.
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#2243699 - 10/07/20 03:21 PM Re: BSA and PPP Loans Audit123
Mel in WA Offline
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Joined: Mar 2013
Posts: 1,122
As I think about the compliance risks associated with this program, if banks are considered "conduits", what type of compliance issues should be identified? For example, during the fire drill of getting these out the door, some offices processed requests for existing customers first rather than in the order received, because it was easier from a BSA standpoint. Is that a fair lending violation?

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#2243703 - 10/07/20 03:37 PM Re: BSA and PPP Loans Audit123
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 77,261
Galveston, TX
Most likely would depend on the entire PPP applicant pool you received versus who your current customers might be. If you don't already service a proper proportion of your minority and low income areas, the risk would increase.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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