Who Makes the Final Decision about Filing a SAR?

By Leslie Callaway, CRCM, CAFP; Mark Kruhm, CRCM, CAFP; and Rhonda Castaneda, CRCM.

QWho has the authority to make the ultimate determination about whether the bank must file a Suspicious Activity Report? For example, if the business unit believes a SAR is unnecessary, based on its familiarity with the customer, but the Bank Secrecy Act officer believes that one should be filed, who makes the final determination?

AThe BSA officer makes the determination. An important aspect of BSA compliance is that the BSA officer must be able to act with authority and independence, a point emphasized in the updated provisions of the FFIEC BSA/AML Examination Manual released in April 2020. As stated in that update, the BSA officer must have “the ability to undertake the BSA compliance officer’s role without undue influence from the bank’s business lines.” In the past, there have been examples where a business line overruled the BSA officer in making such decisions that resulted in fines and sanctions against the bank. Thus, in this case, the BSA officer makes the final decision. (Answer provided October 2020.)

QDue to an increase in fraud, my bank is revising its loan policy and plans to decline loan requests from non-U.S. citizens, including permanent resident aliens (green card holders) who live and work in our community. Are there any potential Regulation B (Equal Credit Opportunity Act) issues we should consider when making this policy change?

APossibly. Although Regulation B permits banks to consider immigration status, the bank must focus its consideration on the bank’s ability to be repaid or to collect on the debt, if necessary. Additionally, some state and federal civil rights laws prohibit discrimination based on alienage (lack of citizenship).

Under Regulation B, creditors may consider citizenship but not national origin. Section 1002.6(b)(7) states that a creditor may consider the applicant’s immigration status or status as a permanent resident and any additional information that may be necessary to ascertain the creditor’s rights and remedies regarding repayment. A permanent resident alien is a lawful resident of the United States who has been granted the right to live and work in the U.S. indefinitely. In contrast, other aliens may lawfully stay in the U.S. on a temporary basis, e.g., persons who hold visas to study or work in the U.S. for a specified time.

Comment two to §1002.6(b)(7) states that denial of credit because the applicant is not a citizen “is not per se discrimination based on national origin.” The commentary further states that a person’s immigration status and ties to the community (such as employment and residence) could have a bearing on a creditor’s ability to obtain repayment. Finally, the commentary is clear that creditors may differentiate between non-citizens: those who are permanent residents that have resided in the U.S. for a long time and those who are in the country temporarily, for example, on a student visa.

Banks should consider that under the regulation, creditors may look at and consider immigration status in determining the applicant’s ability to repay and likelihood of repaying the loan and the creditor’s ability to collect the debt if the applicant were to default. However, if a bank lends only to citizens and declines applications from permanent resident aliens who otherwise meet the bank’s standards of creditworthiness, it should be prepared to explain the reasoning behind its policy. Additionally, lawsuits have been filed (and settled) challenging banks’ policies of lending only to citizens and permanent resident aliens under state and federal civil rights laws that prohibit discrimination on the basis of alienage. (Answer provided October 2020.)

QThe flood rules require that a bank provide the borrower a notice of special flood hazards and availability of federal disaster relief assistance within a “reasonable time” before consummation of the loan when a property is in a designated flood zone requiring flood insurance. What is considered a “reasonable” time by the regulators?

AThe agencies noted in the flood insurance compliance exam manuals that 10 days is generally considered a “reasonable” time interval for provision of the notice before consummation. (Answer provided October 2020.)

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