loan to illegal

Through a review, we have identified a loan to an illegal. When the loan was underwritten, approved and booked, the information was missed. We gave her the benefit of the doubt and asked her to bring it the proper documentation. As you can guess, we haven't rec'd it. Although it is not prudent lending practice to allow this to happen, are we in some other trouble from another reg?

This could be a CIP violation, depending on what your CIP requirements are.

It is a CIP violation per our policy. But what do I do to fix it? Demand the loan? What are my options?

There is nothing you can do to fix the CIP violation or the exception to policy. You should document the finding and shore up any holes in your procedures to prevent this from happening again.

You can call the loan if your loan contract provides for it, however, there may be issues regarding collection of the debt (sorry, that's not my area of expertise).

Is the loan contract valid if the borrower is here illegally?

From my basic understanding of contract law, a contract is legally binding if 2 (or more) parties of sound mind are in agreement and sign the document. I don't think citizenship or immigration status affect one's ability to enter into a contract. But I'm not a lawyer and that would be a better question for bank counsel.

Citizenship and residency status don't affect the validity of the loan contract but may affect your ability to collect if the borrower leaves the country.

Very helpful. Thank you.

I didn't see it specifically mentioned above, but you should also follow your SAR decisioning process as presumably some piece of identifying information was false/stolen.

Good point. Thank you.