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#61825 - 02/14/03 09:29 PM BSA and loans
Rick Tryon Offline
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Rick Tryon
Joined: Mar 2002
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Clinton IN, USA
Sec. 103.33 says: Each financial institution shall retain either the original or a microfilm or other copy or reproduction of each of the following:

(a) A record of each extension of credit in an amount in excess of $10,000, except an extension of credit secured by an interest in real property, which record shall contain the name and address of the person to whom the extension of credit is made, the amount thereof, the nature or purpose thereof, and the date thereof;

Are the loan docs themselves good enough to satisfy the requirement?
I just reviewed a loan that a lender made for $12,500, on which they listed the purpose was listed as "personal". My argument is that under BSA we should be listing a more specific purpose. In this case it was debt consolidation.
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Lending Compliance
#61826 - 02/14/03 10:25 PM Re: BSA and loans
Richard Insley Online
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Richard Insley
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Toano, VA
This is one of those prehistoric sections of the BSA regs that makes no sense in today's marketplace. Read literally, the "purpose statement" requirement would make it impossible to offer credit cards with a generous-sized credit limit. Try to keep these statements specific and watch for warning signs that a loan could be used as part of a complex laundering scheme.

Interestingly, you would be perfectly compliant (with this part of the BSA) if you obtained the customer's statement that the proceeds of the loan were for the purpose of acquiring, processing and distributing controlled substances.
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#61827 - 02/15/03 10:59 AM Re: BSA and loans
David Dickinson Offline
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David Dickinson
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Central City, NE
When I was an examiner, I would have cited a bank if the only purpose of the loan was "personal." We always advise our clients to be more specific. Would you want to fund an illegal operation?

The purpose can be documented anywhere.
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#61828 - 02/20/03 04:35 PM Re: BSA and loans
Rick Tryon Offline
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Rick Tryon
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Posts: 169
Clinton IN, USA
Are HELOCs handled the same? What if the line of credit is less than $10,000, but the total of withdrawls against the line exceeds $10,000?
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#61829 - 02/20/03 04:59 PM Re: BSA and loans
Dan Persfull Online
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Dan Persfull
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Bloomington, IN
Rick, a HELOC would be an extension of credit secured by real property, or am I missing your question?
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#61830 - 02/20/03 06:50 PM Re: BSA and loans
E.E.G.B Offline
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E.E.G.B
Joined: Jul 2002
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the sandy shore
Quote:

When I was an examiner, I would have cited a bank if the only purpose of the loan was "personal."




Agreed! And that is one of the things I've brought up here. They insist that it's ok just to put 'refinance' down as purpose, which I don't think is quite specific enough. Rate reduction refi? Cash out refi? If cash out, what is the purpose of that cash - debt reduction? HI? But I'm probably in the minority on this one.
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#61831 - 02/20/03 06:57 PM Re: BSA and loans
Skittles Online
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Skittles
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TN
I'm not and have never been a regulator, but I agree. I traing (or try to) that we need to know a fairly specific purpose on all loans.
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#61832 - 02/21/03 07:46 PM Re: BSA and loans
Rick Tryon Offline
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Rick Tryon
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Posts: 169
Clinton IN, USA
Dan, I must have been half asleep when I typed that question. What I meant was open ended credit lines in general. Those unsecured or secured by other collateral (probably commercial loans).
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#61833 - 02/21/03 08:05 PM Re: BSA and loans
Dan Persfull Online
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Dan Persfull
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Posts: 47,517
Bloomington, IN
Rick, if they are not secured by real property then I would say they fall under BSA. As for the LOC < $10k but withdrawals exceed $10k I do not think would be covered. I understand this requirement to apply to single extensions of credit > $10k.

Maybe some BSA experts can elaborate on that understanding.
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