CDD/Monitoring - Loans

I'm now fairly comfortable with CDD for deposits accounts; however, I have not addressed loans.

I'd appreciate feedback on what others are doing to identify potential high-risk loan customers, either at account inception or ongoing (e.g., if our system can do it, check for large cash paydowns of loans, check for loans being paid down more often than once a month).

Thanks.

We review all loans for BSA issues; run World Check on principals etc.
Ongoing run reports on cash payments and early payoffs.

Thanks. Excuse my ignorance, but what is "World Check"?

http://www.world-check.com/overview/

Here's a link

Keep in mind that your CDD/EDD process needs to be risk based. This process could be simplified depending on the type of lending products, payment methods, or any other restrictions or services linked to these products.

For instance, you could apply CDD to a residential mortgage, you would do a bit more to syndications (considering that you are not the lead bank in the transactions), and obviously you would aply EDD to loans secured by deposits, bonds, stocks, etc...

I would start by gathering as much background as I can about the lending products offered by my bank. I would sit down with loan officers and get their input.

More specifically, CDD could include:
--Obtaining at least the FIVE CIP pieces of information
--Running OFAC, Chex System, and/or World Check (as available)
--Look for any discrepencies between info provided by customer against info listed on credit reports
--On-site visit for businesses seeking lines of credit or loans secured by any collateral other than real estate properties (residential or commercial)
--Obtain expected use of account which includes proposed repayment activity
--Restrict or at least conduct a review of loan payments submitted by third parties
--Conduct a review for early payoffs, loan defaults, etc..
--As a rule of thumb, if you don't establish parameters that would trigger a loan review, conduct at least an annual review of your high risk lending relationships.