Exceptive Relief – In FinCEN’s exceptive relief related to rollovers, renewals, modifications and extensions, how do they describe loan- and line-related activities?

Compliance > BSA > FinCEN CDD/BO Rule - eff 2016
Q:  In FinCEN’s exceptive relief related to rollovers, renewals, modifications and extensions, how do they describe loan- and line-related activities? 
 
A:  In September, 2018, FinCEN issued a ruling that addressed exceptive relief from beneficial ownership requirements in specific situations.  In part, the ruling included covered product descriptions and characteristics.  For example, the following was included related to loan- and line- related activities: 
 
"Loan Renewals, Modifications, and Extensions
 
Generally, a loan account is an account created to track transactions related to a loan that has terms and conditions tailored to the needs and circumstances of the customer, such that the issuance of a new loan would result in a new account relationship.
 
However, once a loan application process is finalized and a loan approved, a financial institution may renew, extend, or otherwise modify the loan without substantively changing the terms or requiring additional underwriting. Industry has also represented that, as with CDs, some loans are subject to automatic renewal, modification, or extension within a specified time and require no action from the customer for that renewal, modification, or extension to take effect.
 
Commercial Lines of Credit and Credit Cards
 
A commercial line of credit account is a type of revolving loan account that allows a commercial enterprise to draw upon a predetermined amount of funds and generally use those funds only for specified business purposes. Small businesses rely on this mode of financing to cover short-term needs such as paying suppliers and addressing payroll needs. A business customer can repay the line at any time by making payment to the financial institution through the account, at which point those funds become available for borrowing again. Credit card accounts are revolving accounts, similar to commercial line of credit accounts, that grant the customer a maximum credit limit, which can generally be used repeatedly so long as the limit is not exceeded. The financial institution may change certain terms of a commercial line of credit or of a credit card, such as the credit limit, without requiring the affirmative assent of the customer."
 
 
 
This Q&A was based on FinCEN’s ruling issued on September 7, 2018, as communicated in FIN-2018-R003, which may be found here:  https://www.fincen.gov/sites/default/files/administrative_ruling/2018-09-07/Permanent%20Exceptive%20Relief%20Extension%20of%20Compliance%20Date%20CDs_final%20508.pdf
 

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