An individual from Argentina would like a business loan to purchase an office building here in the U.S. The loan would be secured by a mortgage on the building, as well as by some funds that will be wired to us from Argentina. Are there any BSA concerns with making a loan to such a customer?

Before engaging in a transaction with a foreign national, your bank should first check the Office of Foreign Assets Control (OFAC) database to ensure that the individual and his business are not specially designated nationals that your bank would be prohibited from dealing with.

In addition, the FFIEC’s BSA/AML Examination Manual includes a concise description of the risk factors and assessment criteria specifically related to serving foreign business entities. For loans that may pose a higher risk for money laundering and terrorist financing, your bank “should complete due diligence on related account parties (i.e., guarantors, signatories, or principals).” Additional due diligence could include “performing reference checks, obtaining credit references, verifying the source of collateral, and obtaining tax or financial statements on the borrower and any or all of the various parties involved in the loan.”

You also should review your bank’s customer identification program (CIP) policy to determine your internal restrictions or requirements for lending to non-U.S. citizens. At a minimum, your bank should collect a name, address, and “taxpayer identification number, passport number and country of issuance, alien identification card number, or number and country of issuance of any other government-issued document evidencing nationality or residence and bearing a photograph or similar safeguard.”

After obtaining the customer’s information, you must verify it through either documentary or non-documentary methods, such as by obtaining certified articles of incorporation, a government-issued business license, a partnership agreement, or trust instrument. Your CIP should take into account the additional risks of a foreign business, especially where your bank is not familiar with the documents presented or where there is an increased risk that your bank will be unable to verify the true identity of a customer.

For resources related to our guidance, please see:

Office of Foreign Assets Control — Specially Designated Nationals And Blocked Persons List

FFIEC BSA/AML Examination Manual, Business Entities (Domestic and Foreign) — Overview (“Risk assessments may include a review of the domestic or international jurisdiction where the business entity was established, the type of account (or accounts) and expected versus actual transaction activities, the types of products that will be used, and whether the business entity was created in-house or externally.”)

FFIEC BSA/AML Examination Manual, Business Entities (Domestic and Foreign) — Overview (For a business account, “required account opening information may include articles of incorporation, a corporate resolution by the directors authorizing the opening of the account, or the appointment of a person to act as a signatory for the entity on the account.”)

FFIEC BSA/AML Examination Manual, Lending Activities—Overview (“All loans are considered to be accounts for purposes of the CIP regulations. For loans that may pose a higher risk for money laundering and terrorist financing, including the loans listed above, the bank should complete due diligence on related account parties (i.e., guarantors, signatories, or principals). Due diligence beyond what is required for a particular lending activity will vary according to the BSA/AML risks present, but could include performing reference checks, obtaining credit references, verifying the source of collateral, and obtaining tax or financial statements on the borrower and any or all of the various parties involved in the loan.”)

FinCEN Regulations, 31 CFR 1020.220(a)(2)(i)(A) (“The bank must obtain, at a minimum, the following information from the customer prior to opening an account: (1) Name; (2) Date of birth, for an individual; (3) Address, which shall be: . . . (iii) For a person other than an individual (such as a corporation, partnership, or trust), a principal place of business, local office, or other physical location; and (4) Identification number, which shall be: . . . ii) For a non-U.S. person, one or more of the following: A taxpayer identification number; passport number and country of issuance; alien identification card number; or number and country of issuance of any other government-issued document evidencing nationality or residence and bearing a photograph or similar safeguard.”)

FinCEN Regulations, 31 CFR 1020.220(a)(2)(ii) (“The CIP must contain procedures for verifying the identity of the customer, using information obtained in accordance with paragraph (a)(2)(i) of this section, within a reasonable time after the account is opened. The procedures must describe when the bank will use documents, non-documentary methods, or a combination of both methods as described in this paragraph (a)(2)(ii).”)

FinCEN Regulations, 31 CFR 1020.220(a)(2)(i)(A)(2) (“For a person other than an individual (such as a corporation, partnership, or trust), documents showing the existence of the entity, such as certified articles of incorporation, a government-issued business license, a partnership agreement, or trust instrument.”)

FinCEN Regulations, 31 CFR 1020.220(a)(2)(ii)(B)(2) (“The bank's non-documentary procedures must address situations where an individual is unable to present an unexpired government-issued identification document that bears a photograph or similar safeguard; the bank is not familiar with the documents presented; the account is opened without obtaining documents; the customer opens the account without appearing in person at the bank; and where the bank is otherwise presented with circumstances that increase the risk that the bank will be unable to verify the true identity of a customer through documents.”)