On September 28, 2018, FinCEN, the OCC, Federal Reserve, FDIC, and NCUA released joint guidance which grants financial institutions an exemption from CIP requirements for loans extended to customers to facilitate purchases of property and casualty insurance policies. The justification for this exemption is based on the fact that these types of loans present a low risk of money laundering due to their very specific purpose.
Premium finance loans are loans that provide short-term financing to businesses to facilitate their purchases of property and casualty insurance policies. These policies often have a single-premium payment, meaning that a loan for such policies helps to spread out the cost over a longer period of time. FinCEN and the regulatory agencies have stated that these types of loans “present a low risk of money laundering because the purpose for which the loans are extended and limitations on the ability of a customer to use such funds for any other purpose.” Furthermore, FinCEN has stated that property and casualty insurance policies themselves are not tools that can easily be used to launder money, due to a number of factors including the fact that the bank typically remits loan proceeds to either the insurance company directly or through the agent or broker.
The FinCEN version of the release can be found here.