May
Mat 13

Question: We have two consumers applying for a mortgage jointly and have provided the same email address for each applicant. The bank complies with TRID disclosures electronically, how should the bank ensure that each consumer received the disclosure, since the email addresses are the same (does the bank email each disclosure twice or require two confirmations?).

Answer: Regulation Z, § 1026.17(d) and Commentary 2 govern disclosures to multiple consumers.  When two consumers are joint obligors with primarily liability on an obligation, the disclosures can be given to either one of them if the bank chooses.  Merely being a guarantor or surety to the loan does not require the consumer to receive the disclosures.  It is always important to remember any internal policy or investor requirements as this may differ.  The Regulation does require each consumer to receive disclosures when: (1) the transaction is subject to the right of rescission; and (2) each consumer must receive the disclosures who has a right to rescind. Therefore, for a transaction that is not subject to a right of rescission, it is sufficient that the primary applicant confirms receipt of the disclosure.

It is always important to remember E-Sign requirements when complying with providing TRID disclosures electronically.  Compliance Alliance’s E-Sign toolkit is very helpful to assist with those obligations: https://compliancealliance.com/find-a-tool/by-toolkit/e-sign


May 3: 

Question: My customer would like to establish a benefit account for a fundraiser they are doing in their community. What type of account should this be and what documentation is needed?

Answer: Generally, benefit or memorial accounts are accounts that will be used in connection with raising money for people who need financial assistance due to an accident, illness, or other tragedy. There are several ways that these types of accounts could be set up at the financial institution:

  • A simple trust can be drafted, and the account opened in the name of the trust (e.g.—irrevocable trust agreement).
  • Organization assisting in the fundraiser or memorial could open the account under their name for collected and deposited funds (e.g.—treat like opening an organization account)
  • Account could be opened in name of person(s) benefiting from the fundraiser (e.g.—treat account like individual/single-party or joint/multiple-part account but the beneficiary must be authorized to transact on the account).

The above methods are generally the only practical methods used when determining how to establish these types of accounts. Some banks may allow customers to open these accounts as informal trusts, like “FBO” or “ITF” accounts. But this brings in a couple of other considerations for the bank, especially when it comes to ownership of the account, and CIP purposes.

And as always, the bank is within their rights to recommend the customer consult with an attorney or a tax professional.

C/A has an excellent cheat sheet for Benefit/Memorial Accounts that further breaks down these considerations here: https://compliancealliance.com/find-a-tool/tool/benefit-memorial-fund-accounts-cheat-sheets




April

 

April 27:
Question: Are banks required to perform OFAC checks on incoming domestic wire transfers?

Answer: OFAC requires banks to implement a program in accordance with the bank’s size, complexity, risk-factors, and other criteria, in order to block transactions with certain individuals and counties on the OFAC list. There is no exception to doing business with a party or geography on the OFAC list. However, that being said, a bank’s program will not necessarily cover every single transaction the bank engages in.

For example, cashing non-customer’s checks. While banks often do not perform an OFAC check during this transaction, OFAC does not exempt non-customer check cashing from its requirements. That is, if a non-customer is an SDN individual, the bank is still technically violating OFAC by engaging in the transaction. However, regulators and the OFAC program itself recognizes the limitation of resources of an institution and other more prevalent OFAC-related risks that the institution may encounter. For that reason, if a bank implements and follows an OFAC program under which checking each non-customer check cashing is not feasible, it is likely regulators would not criticize such a practice. This being said, it is important to consider the context. An isolated check-cashing or two without an OFAC verification will likely be compliant in light of the above. However, consistently cashing checks for the same non-customer who happens to be on an OFAC list will almost certainly result in an OFAC violation.

A similar principle applies to incoming wire transfers. Generally, OFAC allows institutions to rely on the verification process of another institutions that is subject to OFAC provisions. Nonetheless, this should be addressed under the bank’s OFAC program and the bank would have the burden to show why an OFAC check was not performed, in the event of accepting a wire transfer from an OFAC party.

Reference: https://bsaaml.ffiec.gov/manual/OfficeOfForeignAssetsControl/01

April 15: 
Question: State Bank has a customer who is getting a home equity loan for home improvement and debt consolidation for credit cards. Is the bank required to gather GMI/Demographic Information and is this HMDA reportable?

Answer: It would be HMDA reportable if the purpose of the loan is for improvement of a dwelling and is also secured by a dwelling. So, assuming that is the case, and it is reportable, then yes, GMI/demographic information would be collected and reported as applicable. Reference: https://www.consumerfinance.gov/policy-compliance/rulemaking/regulations/1003/2/#i

April 7:

Question: What constitutes “demonstrable consent” when meeting ESign requirements? Are banks required to collect information that the consumer actually read the disclosure apart from just acknowledgement?

Answer:  The statutory requirement can be found in 15 USC §7001, and reads as follows:

"[T]he consumer—

(i) prior to consenting, is provided with a statement of the hardware and software requirements for access to and retention of the electronic records; and

(ii) consents electronically, or confirms his or her consent electronically, in a manner that reasonably demonstrates that the consumer can access information in the electronic form that will be used to provide the information that is the subject of the consent[.]"

https://www.gpo.gov/fdsys/pkg/USCODE-2015-title15/html/USCODE-2015-title15-chap96.htm

Technically, the statute does not require that the consumer actually read the statement of hardware and software requirements--the consumer just needs to be presented with them.

As for "demonstrable consent," typically the consumer must either first consent, or later confirm any prior consent they gave, using the same method of delivery by which they'll be receiving the disclosures. C/A considers that to be a manner that "reasonably demonstrates" a consumer’s ability to access electronic information, in accordance with the statutory requirement above. Best practice would be for the consumer to show some evidence that they viewed the actual e-SIGN disclosure (such as by including a numeric code in the document and then asking them to enter that code when providing consent), but it is not absolutely required to do that as long as the process meets the bare minimum statutory requirements.


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