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#1753332 - 10/29/12 10:04 PM Unsecured Loan over $10,000
sopuno Offline
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Joined: Jul 2008
Posts: 133
lost in paperwork
For some reason I have it in the back of my mind that BSA requires that unsecured loans over $10,000 have to have a clearly stated purpose.

Am I completely making that up? I can't find it in the regulation anywhere.

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#1753337 - 10/29/12 10:14 PM Re: Unsecured Loan over $10,000 sopuno
Doug Hendrickson Offline
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Doug Hendrickson
Joined: Oct 2009
Posts: 3,927
Here's the citation 31 CFR 103.33 (Section 8.1):

BSA Infobase

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. The record
must contain the name and address of the borrower,
the loan amount, the nature or purpose of the loan,
and the date the loan was made. The stated purpose
can be very general such as a passbook loan, personal
loan, or business loan. However, financial institutions
should be encouraged to be as specific as possible
when stating the loan purpose. Additionally, the
purpose of a renewal, refinancing, or consolidation is
not required as long as the original purpose has not
changed and the original statement of purpose is
retained for a period of five years after the renewal,
Last edited by Doug Hendrickson; 10/29/12 10:15 PM.
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#1753353 - 10/30/12 09:29 AM Re: Unsecured Loan over $10,000 Doug Hendrickson
Elwood P. Dowd Offline
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Elwood P. Dowd
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Posts: 21,939
Next to Harvey
A friendly amendment... FinCEN renumbered the BSA regulations last year. The current citation and language is:

ยง 1010.410 Records to be made and retained by financial institutions.

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;


Doug's exccerpt is from the FDIC's 2004 examination procedures which were supersceded by the 2005 the BSA/AML Examination Handbook. Regardless, those old exam procedures contain more of an explanation on the subject than even the 2010 version of the Handbook does.

In my opinion, things have changed enough that a statement of purpose such as "personal" or "business" is ridiculous. To be of any value for AML purposes, it has to be specific enough to allow a reviewer to trace the proceeds of the loan to see if their use was consistent with the statement of purpose.

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#1753375 - 10/30/12 01:31 PM Re: Unsecured Loan over $10,000 Elwood P. Dowd
sopuno Offline
100 Club
Joined: Jul 2008
Posts: 133
lost in paperwork
Thank you both!

The loan I'm looking at is a 60 day note for $145K. The stated purpose is "Purchase a short term investment asset". I feel like that is too vague. They obviously have a specific asset in mind.

Do I need a better purpose?

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#1753384 - 10/30/12 01:44 PM Re: Unsecured Loan over $10,000 sopuno
Skittles Online
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Skittles
Joined: Sep 2002
Posts: 13,965
TN
I would require that here - that's way too vague.
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