The FDIC, the Federal Reserve Board, the OCC and the National Credit Union Administration (collectively, the "agencies") issued an exemption from customer identification program ("CIP") requirements for banks extending loans to facilitate a borrower's purchase of property and casualty insurance policies. The agencies stated that the latest exemption Order supersedes the September 2018 Exemptive Order as to such loans.
In the newly issued Order, the agencies exempted banks and their subsidiaries from the CIP requirements implementing Section 326 of the USA PATRIOT Act (31 U.S.C. 5318(l)) ("Identification and Verification of Accountholders"). The agencies stated that the exemption follows FinCEN's determination that premium finance loans present a low risk for money laundering and terrorist financing because (i) the loan proceeds are remitted to the insurance company rather than to the insured party, (ii) property and casualty insurance policies have no investment value, and (iii) borrowers cannot use premium finance accounts to purchase other merchandise, deposit or withdraw cash, write checks, or transfer funds.
The agencies noted, however, that banks that facilitate insurance finance lending are still required to comply with all other applicable Bank Secrecy Act regulatory requirements, including the suspicious activity report filing requirement.
Primary Sources
- FDIC Press Release: Bank Secrecy Act - Customer Identification Program Rule Exemption for Insurance Premium Finance Loans
- OCC Bulletin 2020-88: Bank Secrecy Act / Anti-Money Laundering - Revised Order Granting Exemption from Customer Identification Program Requirements for Premium Finance Lending
- FDIC, FRB, OCC and NCUA Regulatory Guidance: Order for CIP Exemption (10/5/2020)
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