BSA Loan Purpose

Posted By: trail hiker

BSA Loan Purpose - 09/18/07 01:01 PM

I believe the BSA issue falls under 103.33(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; (emphasis added by me)
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From this thread in lending I have a question.
Do I need to nit pick about loan purpose under $10,000. I have sort of been doing that and surely I need to pick my battles.
(How can I learn how to transfer thread lines like the rest of you? Specifically I see them copied in a box with blue highlights. And mine doesn't show the author. Is there someplace on the site that has these types of instructions?)
Posted By: LoisLane

Re: BSA Loan Purpose - 09/18/07 01:12 PM

Originally Posted By: trail hiker
Do I need to nit pick about loan purpose under $10,000.


You are OK for BSA purposes on loans under $10,000, but when the borrower doesn't state the purpose of the loan how do you know whether it is HMDA reportable or not?
Posted By: Skittles

Re: BSA Loan Purpose - 09/18/07 01:15 PM

Sorry, but I nit pick. I think the Bank should have a specific purpose on each and every loan.
Posted By: trail hiker

Re: BSA Loan Purpose - 09/18/07 01:17 PM

I've been working on that issue as well. But now I know I don't have to insist that under $10,000 is a BSA issue as well. But BSA might have a greater impact when telling people why something is necessary. Thanks, Lois.
Posted By: Bagweaver

Re: BSA Loan Purpose - 09/18/07 02:15 PM

I agree. The more employees consistently follow procedures, the fewer exceptions there should be. Why try to remember a monetary cut-off figure?

Does anyone accept "personal expenses" and/or "equity loan" as the purpose for a loan?
Posted By: Skittles

Re: BSA Loan Purpose - 09/18/07 02:20 PM

The only loan where we are accepting vague responses are for HELOCs. This can be understandable in this instances. Although we still have lenders who don't understand the concept of obtaining a specific purpose.
Posted By: Poohie

Re: BSA Loan Purpose - 09/19/07 07:55 PM

If a borrower refinances an in-house car loan for $20,000 and gets $5,000 cash out, do we need a loan purpose?
Posted By: David Dickinson

Re: BSA Loan Purpose - 09/20/07 02:02 AM

Yes. ALL loans >$10,000, not secured by real estate must have a loan purpose. Refer to 31CFR103.33(a).
Posted By: Retread

Re: BSA Loan Purpose - 09/20/07 12:49 PM

Originally Posted By: Duchess Skittles
Sorry, but I nit pick. I think the Bank should have a specific purpose on each and every loan.


I agree with Duchess Skittles. See bottom of page 1 and top of page 2.

http://www.occ.treas.gov/FTP/EAs/ea2007-011.pdf
Posted By: Little Miss BSA

Re: BSA Loan Purpose - 09/21/07 05:13 PM

I agree that the bank should have some knowledge of the loan purpose...but how far do you go? If the customer stated that the loan was to buy widgets, do you ask for an invoice or relevant evidnece showing that he in fact purchased widgets? Also, how many institutions require that a loan customers also have a deposit realtionship ay your bank.
Posted By: David Dickinson

Re: BSA Loan Purpose - 09/21/07 07:03 PM

I also agree that you should ALWAYS have a loan purpose (forget the real estate and <$10,000 exemptions). However, I'm with BSAinFLA. Do you make them prove it? I don't think so. I think it's a Know Your Customer type of attitude.

I'm also disturbed by the International Bank's "Working Capital" violation. I'm sure there is much, much more to the story. Many bank's use terms such as "working capital", "Operating funds", etc. There's no guidance that says "working capital" is not sufficient. Now examiners are going to read this bank's enforcement action and apply this "logic". I'm concerned that more bank's will get cited for not having a very specific purpose description.
Posted By: Nanwa

Re: BSA Loan Purpose - 09/21/07 08:22 PM

I nit pick when the purpose given is stated as "personal" or "personal expenses". That, in my opinion, is not enough of a description.
Posted By: David Dickinson

Re: BSA Loan Purpose - 09/21/07 09:13 PM

I agree. "Business" is also not sufficient in my opinion.

Drug money is personal or a personal expense.
Posted By: ksm

Re: BSA Loan Purpose - 11/30/07 03:21 PM

Is it ok to just have the purpose on the note or loan documentation or should it be on our mainframe also? i.e. On one loan our mainframe said the loan was for personal expense, but the loan documentation said it was for divorce settlement.

Do you agree with the following list?
Ag operating - ok
Business operating - ok
Short term operating - ok
Operating LOC - ok
Bridge loan - ok
Business property improvements - ok
Living expense - ok
Consolidation expense - ok
Business LOC - ?
Business investment - ?
Business expense - no
Short term expense - no
Misc. expense - no

Thanks for your help.
Posted By: WonderWoman

Re: BSA Loan Purpose - 12/04/07 11:38 PM

Do you need to have a purpose for Line of Credits over $10k?
Posted By: Andy_Z

Re: BSA Loan Purpose - 12/05/07 03:50 AM

31 CFR §103.33 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;
Posted By: ksm

Re: BSA Loan Purpose - 12/05/07 07:33 PM

So is business investment an adequate purpose for 103.33?
Is a personal line of credit an adequate purpose?
Is business line of credit and acceptable purpose?
Posted By: ksm

Re: BSA Loan Purpose - 12/10/07 05:31 PM

If you were doing a BSA review and noticed loans with the following notations would you count them as violations?

business investment?
personal line of credit?
business line of credit for operating expense?
Posted By: Dollye7

Re: BSA Loan Purpose - 12/11/07 03:11 PM

We get a purpose on all loans, but frequently it is a "generic" purpose like some of those above. I particularly like the one -"to pay off the existing loan." I "nit pick" when I find them. I consider it training - otherwise the description would dwindle down to something like "they needed the money."
Posted By: fslic banker

Chapter X Record Retention requirement for credit - 04/11/13 06:40 PM

I was doing some BSA record retention research today and looked at Chapter X's § 1020.410 (Records to be made and retained by banks) and didn't see the recordkeeping requirement for extensions of credit over $10k not secured by real property. Any idea where that requirement is now codified?
Posted By: rlcarey

Re: Chapter X Record Retention requirement for credit - 04/11/13 06:43 PM

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