CIP and Loan Officers
By Jerod Moyer
Are your loan officers having trouble complying with your CIP procedures? Is it because they don't understand what they are required to do? Maybe they understand but the procedures are cumbersome and require more than what is actually required by the regulation. If that's the case maybe, it's time to revisit your procedures. You know it has been almost five years since CIP was born.The most common CIP complaint we hear is that a bank's CIP procedures require the loan officer to request multiple forms of identification and/or verification. What's frustrating to the loan officer, is that they are already reasonably satisfied the customer is who they say they are. You don't give away money not knowing to whom you are giving it. There are more controls in place when it comes to loans than you can shake a stick at.
Why are the bank's CIP procedures written this way? There could be any number of reasons; however, it's all hindsight. We were all pretty uptight about CIP five years ago. It's probably time to let go and loosen up a little bit. So, let's take a minute and revisit the requirements.
CIP requires the bank to be reasonably satisfied the customer is who they say they are. It's really that simple. When it comes to the lending department, CIP is mostly an administrative duty. I've never heard of a lender making a loan without already being reasonably satisfied of a customer's identity. Usually, prior to making a loan the loan officer has completed a combination of the following non-documentary verifications in addition to reviewing the customer's drivers' license (documentary verification):
- Contacting a customer (via phone, mail, in person visit, etc.)
- Checking credit references with other financial institutions;
- Obtaining a financial statement; or
- Comparing to credit reports or other public database information (Chex Systems, Telecheck, internet databases, etc.).
Maybe, your current CIP procedures don't recognize these as acceptable CIP verifications. If they don't, I encourage you to revisit your procedures. The bottom line is your loan officers are probably already doing over and above what the regulation requires. As a result, loan officers don't see the logic in the regulation (because it isn't there) and get frustrated. Or (even more damaging) they know the regulation doesn't really require what your procedures state and they resent the Compliance Officer for making up rules. Either way, it's not healthy for you or the bank.
If this is the scenario at your bank, on behalf of your loan officers please revisit your procedures and make them less cumbersome! Here's your chance to win favor with the lenders by lessening a requirement. Who knows, you might even get a hug from your loan officers. Okay, that might be a stretch, but they'll love you for it!
If you need a refresher on Bank Secrecy Act/Anti-Money Laundering requirements, we will be conducting a seminar in February. For more information see our Seminar webpage.