The Financial Crimes Enforcement Network and the financial regulatory agencies today announced an exemption from the customer identification program rules for premium finance loans made by banks to commercial customers. The proposal is the result of a years-long advocacy effort by ABA and several member banks.
Banks typically extend these loans to finance premiums for property and casualty insurance, which is deemed low risk for money laundering by FinCEN. However, they remained subject to CIP and beneficial ownership rules, which imposed a significant cost burden that made them unprofitable. It also made it difficult for banks to compete with non-depositories that offered similar products, causing some banks to exit the business.
FinCEN took action in 2016 (and again in 2018) to provide an exemption from beneficial ownership requirements. Today’s exemption is another critical step that will allow banks to maintain these business lines and ensure that premium finance loans remain within the regulated financial sector.