Compliance Blog

Categories: BSA

Decipher the Acronym: FinCEN PPP CDD FAQs

Happy Monday! My husband and I are obsessed with HBO Max show, The Great Pottery Throw Down, so we decided to take a 10-week pottery class. It is a lot harder than it looks in the show, and I feel accomplished just making something that even vaguely resembles a pot.

sand castle

On February 1, 2021 FinCEN released an update to their Paycheck Protection Program (PPP) Bank Secrecy Act (BSA) FAQs. The FinCEN guidance has also been included in the SBA’s Paycheck Protection Program Loans FAQs.

The original April FAQs provided guidance on the BSA requirement regarding customer due diligence (CDD), and how credit unions may meet their compliance obligations when issuing PPP loans. First, it clarified the PPP requirements to collect, certify, and verify beneficial ownership information. The guidance explained that if the credit union was lending to an existing member whose information was previously verified, the credit union was not required to re-verify the information.  The letter also clarified that if the credit union had not yet collected beneficial ownership information on the member applying for the PPP loan, the guidance would not require the credit union to collect the information, unless the credit union’s BSA compliance policy required collection of the beneficial ownership information.

Second, FinCEN discussed the discrepancy between the PPP’s requirement to collect information of every individual with 20% or greater ownership and BSA’s requirement to collect information of every individual with 25% or greater ownership. FinCEN reiterated that for existing members, if the credit union had previously verified the required information, re-verification was not required. For new members, the FAQs explain that if the credit union collects the owner name, title, ownership percentage, TIN, address, and date of birth for all individuals with 20% or greater ownership, the BSA requirements will be satisfied. If the any of the ownership interests of 20% or greater belongs to a business, the guidance requires the credit union to obtain the appropriate beneficial ownership information for that entity.

 The newest guidance includes two new questions, addressing the CDD requirements for Second Draw PPP loans. FinCEN simply states that the previous guidance on obtaining customer due diligence requirements are the same for Second Draw PPP loans. Also, the FAQs explain that a credit union may rely on the information it obtained when originating the First Draw PPP loan for the member. If there has been changes in information since the first draw, FinCEN states that the credit union must update the information as required by the credit union’s BSA compliance program. For example, if there is a change in ownership since the first draw, the credit union should review its internal BSA procedures to determine if updating the beneficial ownership information is required when processing the second draw PPP loan. If you are in need of a refresher on triggering events, I highly suggest you pop over to our blog, CDD Rule: Beware of Events that May Trigger Beneficial Ownership Reviews.

For more information regarding PPP, check out our NAFCU FAQs on PPP loans.

About the Author

Janice Ringler, NCCO, NCBSO, Regulatory Compliance Counsel, NAFCU

Janice Ringler, NCCO, NCBSO, Regulatory Compliance Counsel, NAFCUJanice Ringler, NCCO, NCBSO, joined NAFCU as regulatory compliance counsel in May 2020. In this role, Ringler helps credit unions with a variety of compliance issues.

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