Potential Pitfalls For PPP Lenders – Watch Out For Compliance Risks

Financial Services

Forensic & Litigation Consulting | Financial Services

April 16, 2020

As small businesses struggle to stay afloat during these unprecedented times, the federal government has instituted the Paycheck Protection Program (“PPP”) to provide economic relief through guaranteed small business loans. Any lender who wishes to offer these loans are required to have anti-money laundering (“AML”) policies and procedures to comply with the Bank Secrecy Act (“BSA”).

The U.S. Small Business Administration (“SBA”) issued an interim final rule deploying the PPP, which provides $349b in forgivable loans to assist small businesses as they struggle with negative impact of the COVID-19 pandemic. The SBA’s interim final rule outlines the requirements for businesses that wish to apply for a PPP loan, as well as the financial institutions eligible to offer, underwrite, and service these loans. For financial institutions who otherwise qualify as PPP lenders, before doing so, they must have a reasonably designed BSA/AML program in place that covers those customers and the underlying transactions.

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