Do financial institution request letters to supervisory agencies actually make a difference in regulatory change? They do. On September 27, 2018, Federal Banking Agencies (FBAs) responded positively to institution request letters by granting an order for Customer Identification Program (CIP) exception for premium finance loans.
Let’s start by defining premium finance loans so that no CIP omissions are made. Premium finance loans are extended by banks (and their subsidiaries) to commercial customers to provide short-term financing to facilitate purchases of property and casualty insurance policies. Quite a mouthful, so we will continue with the term premium finance loans.
Although the agencies most likely knew that there were issues with gathering CIP on these types of commercial customers, this exception gained momentum in 2016 when a consortium of banks submitted request letters for this CIP relief. The request letters represented that premium finance loans present a low risk of money laundering because: