ABA Compliance Center Inbox, May/June 2016


Under the Anti-Tying Rule, would a bank be prohibited from requiring a person to have a deposit or loan account at the bank in order to get a safe deposit box?

A: No. Requiring a customer to have an account relationship with the bank does not violate anti-tying rules. The anti-tying rule specifically allows a bank to condition both the availability and price of any bank product (the desired product) on the requirement that the customer obtain a “traditional bank product” (the tied product) from the bank. One of the purposes of this exception is to allow banks and their customers to continue to negotiate their fee arrangements on the basis of the customer‘s entire banking relationship with the bank.
Several facts are important in determining whether the traditional bank product exceptions apply in a given situation. Among those is that the exceptions are available only if the tied product is a traditional bank product. The statute defines a traditional bank product to be a “loan, discount, deposit, or trust service.” The statute also defines a “trust service” to mean any service customarily performed by a bank trust department. Products that fall within the scope of these terms include, among other things, safe deposit box services. (Response provided Feb. 2016)

Q: We have a loan to a director’s wife that is unsecured and the proceeds are for home improvements. Since her husband, our director, did not sign the note, would we report it as a Regulation O loan since he receives “benefit” from the funds of this loan?

A: It depends, but it may be prudent to do so. The issue, as you have indicated, is that it may be viewed as made with the intent to bypass the provisions of the regulation, especially as the insider will arguably receive some benefit from the proceeds (i.e., improvement of the dwelling which they both share). However, depending on the specific facts and circumstances of the transaction it may be possible to argue that the loan is indeed not covered, such as the proceeds used to build a home office for the spouse and which will be repaid from the income of the spouse or the spouse’s business. The key will be to document the facts and circumstances, and should likely be reviewed by legal counsel and/or your primary regulator to ensure they agree with the interpretation.


Q: Can the bank, in its discretion, eliminate a debt reported to a credit reporting agency as part of a debt settlement agreement or would this violate the bank’s duty to furnish accurate information? In other words, if the account was accurately reported as late, can the bank eliminate these late or missed payments from the credit history as part of this agreement or would that go against the bank’s accurate reporting responsibilities?

A: No. As you note, FCRA requires banks to provide accurate information to credit bureaus. It doesn’t matter whether the information is negative or positive. If the report reflects that someone paid on time when he or she paid late, it is inaccurate—even if the borrower eventually paid in full or became current. If possible, you can report that a debt settlement agreement exists, but the report should still reflect that the borrower caught up or paid the debt off. In addition to the clear mandate of the law, the reason not to eliminate negative but accurate information is that it harms people who do not pay late or pay in full, because it appears they are the same credit risk as someone who pays late. (Response provided Feb. 2016)

Q: My CEO is wondering if the bank can appoint a Bank Secrecy Act compliance “coordinator” instead of “officer”. The person that our bank wants to give BSA responsibility to is not an official officer of the bank by title and our board is reluctant to make her an officer.

A: One of the four pillars of any bank’s BSA compliance program is the appointment of a BSA compliance officer. This individual is responsible for coordinating and monitoring day-to-day BSA compliance, although it is the board of directors that is ultimately responsible. The BSA Exam Manual states that while the title of the individual responsible for overall BSA/AML compliance is not important, his or her level of authority and responsibility within the bank is critical. The BSA compliance “officer” is responsible for carrying out the direction of the board and ensuring that employees adhere to the bank’s BSA/AML policies, procedures and processes. The board of directors is responsible for ensuring that the BSA compliance officer has sufficient authority and resources (monetary, physical and personnel) to administer an effective BSA/AML compliance program based on the bank’s risk profile.

Within that context, the individual designated to serve this function should be fully knowledgeable of the BSA and all related regulations. That person should also understand the bank’s products, services, customers, entities and geographic locations and the potential risk for money laundering or terrorist financing associated with the bank’s activities. The appointment of an individual who is responsible for bank compliance with the BSA is not sufficient to meet the regulatory requirement if that person does not have the expertise, authority or time to satisfactorily complete the job. The questions you need to ask are: Does your BSA “coordinator” have direct access to the board of directors in order to carry out his/her responsibilities sufficiently? Can this person tell a higher level person to close an account or not make a loan based on relevant BSA factors? Can this person—and will this person—have enough knowledge of insider activities to file a Suspicious Activity Report on a bank officer if necessary?

While the title of “coordinator” is acceptable, it is inconsistent with standard designations. Therefore, the bank should be fully prepared to explain to examiners and auditors that the individual holding that position meets all the expectations set forth in the FFIEC BSA/AML exam manual for a BSA compliance officer. And, it might also help to explain to the board that, whether the person is an officer of the bank or not, the board of directors is responsible for ensuring that the BSA compliance officer has sufficient authority and resources to administer an effective BSA compliance program. (Response provided Feb. 2016)

Answers are provided by Leslie Callaway, CRCM, CAFP, director of compliance outreach and development; Mark Kruhm, CRCM, CAFP, senior compliance analyst; and Rhonda Castaneda, compliance analyst, ABA Center for Regulatory Compliance. Answers do not provide, nor are they intended to substitute for, professional legal advice. Answers were current as of the response date shown at the end of each item.