ALEXANDRIA, Va.–The NCUA Board has approved an interagency order granting an exemption from the requirements found in Section 326(a) of the USA PATRIOT Act for loans extended to facilitate the financing of property and casualty insurance policies.
“The customer identification program requirements under the Bank Secrecy Act’s regulations are an important tool to deter or prevent money laundering or terrorist financing,” said NCUA Chairman Rodney Hood. “However, I am pleased that we are able to consider this targeted relief in the form of an exemption order for this class of transaction.”
NCUA noted premium financing arrangements are typically originated through insurance brokers who arrange short-term financing of property and casualty policies for all customers. Banks, credit unions and other finance companies may provide the financing with the insurance broker as an intermediary.
The agency added these types of transactions are typically same-day finance arrangements, and customer identification program requirements can prove a competitive impediment to financial institutions and a burden to offering such financing. In addition, FinCEN has already exempted this type of financing arrangement from customer due diligence and beneficial owner requirements because they concluded that it represents a very low risk of money laundering or terrorist financing, NCUA reminded.
“Credit unions engaging in premium finance lending must continue to comply with all other regulatory requirements, including BSA/AML regulations that require the filing of suspicious activity reports,” the agency said.
The exemption is effective once all of the federal banking agencies approve it. Additional info can be found on the NCUA’s website.