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#24803 - 07/22/02 07:56 PM OFAC Review For Prospective Loan Customers

What is the OFAC requirement on loans? Specifically, are we required to run each loan applicant's name (Commercial, Consumer, Mortgage)through the OFAC filter prior to loan disbursment? We now run our entire database through an OFAC filter monthly, and any loan customer would pop up as a hit if they were on the OFAC list, but that would be after the loan was disbursed.

What is our responsibility ???

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Security - PUBLIC
#24804 - 07/22/02 08:33 PM Re: OFAC Review For Prospective Loan Customers
Lestie G Offline

Power Poster
Joined: May 2002
Posts: 3,606
Near the Land of Enchantment
It's hard to tell where our responsibility ends!

Loan transactions are definitely covered by OFAC rules. Our position is that we'll check the names through OFAC before we disburse funds. If we wait until after, they already have our money. We felt that was not in line with what OFAC is trying to accomplish. Our regulators liked this approach.
Opinions my own.

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#24805 - 07/22/02 08:56 PM Re: OFAC Review For Prospective Loan Customers
John Burnett Offline
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John Burnett
Joined: Oct 2000
Posts: 39,684
Cape Cod
I'd second that recommendation. Checking OFAC after the fact on loans brings to mind something having to do with horses and barn doors.
John S. Burnett
Fighting for Compliance since 1976
Bankers' Threads User #8

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#24806 - 07/22/02 09:04 PM Re: OFAC Review For Prospective Loan Customers
Rubaiyat Offline
Diamond Poster
Joined: Jun 2001
Posts: 1,373
Lido Deck
I think after Section 326 is implemented, this question will be taken care of for us since an extension of credit is considered an account, and one of the requirements is to determine whether the person(s) appears on any government list of known or suspected terrorists.
--A bad day at sea is better than a good day at work.

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#24807 - 07/31/02 11:13 AM Re: OFAC Review For Prospective Loan Customers
Dana Turner Offline

Platinum Poster
Dana Turner
Joined: Dec 2000
Posts: 543
Pipe Creek TX - U.S.
Security Guy:

If you've been a BOL member for awhile and subscribe to the daily Banker Briefings, you know that sometimes the OFAC list has been updated often -- sometimes twice in the same day. A couple of more things to take into consideration, besides the OFAC list, before you open any account or fund a loan for an existing account holder:
1. If you also use ChexSystems (or any other validation service), remember that this excellent service is user-dependent -- it requires that users actually report customers and activities. If an institution feels that an event is too embarrassing to report, it won't -- and you won't be advised of a potential customer land mine.
2. There are three (3) types of businesses that are historically responsible for disproportionate losses from several sources, including kiting, other NSF checks, forgery, embezzlement, invoice fraud, loan fraud and bankruptcy fraud ("bustout schemes"). These businesses are generally sole proprietorships or partnerships and include:
- General contractors (e.g., construction, plumbing and electrical);
- Eating establishments (e.g., restaurants, drive-ins and takeouts); and
- Drinking establishments (e.g., saloons, bars and lounges).

Take a spin through your local newspaper's bankruptcy filings -- and you'll likely find these businesses make up about 50% of the filings.
Celebrating 42 entertaining years of crime . . .

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#24808 - 08/01/02 02:10 PM Re: OFAC Review For Prospective Loan Customers

Where would you note that OFAC was checked?

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#24809 - 08/01/02 02:22 PM Re: OFAC Review For Prospective Loan Customers
Andy_Z Offline
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Joined: Oct 2000
Posts: 27,503
On the Net
You could have some sort of checklist, but it is more of a procedural certainty, "because we do them all this way". Similar to how you know you gave the new account customer a TISA disclosure.
My opinions are not necessarily my employers.
Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell

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#24810 - 08/01/02 03:24 PM Re: OFAC Review For Prospective Loan Customers
SJB Offline
Diamond Poster
Joined: Jun 2002
Posts: 1,210
We run ALL applicants through the OFAC Checker before we even start processing the application. A copy of the OFAC Checker screen showing "No Match" (which is dated) is kept in the file to show we did our check. On construction loans we also check the contractor and subs that we pay. For savings and deposit accounts we run Chexsystem and have a handy little rubber stamp that says "OFAC OK" and that gets stamped on the sig card/agreement. We do an annual review of our customer list.
My opinions are not legal advice and are worth what you paid for them.

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#24811 - 08/01/02 05:20 PM Re: OFAC Review For Prospective Loan Customers

We do it the same way for loans indicating that OFAC check was performed directly on the application or underwriting summary worksheet (i.e. Loan to Value Ratio, Appraisal, etc.) . Every single wire is also noted as to OFAC check. Your idea of a stamp on the signature card for deposits is a good one--perhaps I will recommend this to our deposit folks.

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#24812 - 08/09/02 04:18 PM Re: OFAC Review For Prospective Loan Customers
DawgFan Offline
Diamond Poster
Joined: Jul 2002
Posts: 1,678
United States
I'd definately check. I read somewhere once that if you fail to check a loan applicant against the OFAC list and they happen to be on there, you could lose your collateral position (it would have to be blocked, I believe).
Opinions expressed are solely my own.

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