The Small Business Administration (“SBA”) recently issued a procedural notice (the “Notice”) to “All SBA Employees and Paycheck Protection Program Lenders” setting forth “Revised SBA Paycheck Protection Platform Procedures for Addressing Hold Codes on First Draw PPP Loans and Compliance Check Error Messages on First Draw PPP Loans and Second Draw PPP Loans.” The Notice sets forth procedures Paycheck Protection Program (“PPP”) lenders must follow in approving First or Second Draw PPP loans under the 2021 Economic Aid Act.
PPP Experience To Date
As we discussed in a recent blog post, with the third round of PPP funding currently underway, the government, through SBA and the Financial Crimes Enforcement Network (“FinCEN”), has begun taking steps to clarify lender compliance obligations in implementing the PPP. The onus of implementing the PPP has been on the private lenders participating in the program. The SBA reiterates this responsibility in the Notice, emphasizing, “[u]nder the CARES Act, PPP Lenders are deemed to have delegated authority to make and approve PPP loans without prior SBA review.”
While lenders have been acting with this “delegated authority” since Spring 2020, they are only now beginning to operate with answers to how it can meet their compliance obligations under the Bank Secrecy Act (“BSA”) while quickly administering the PPP according to the parameters set forth in the CARES Act and subsequent SBA guidance. And, with a new funding round opening nearly a year after the initial rounds, the government and private sector are both grappling with sifting through and processing relevant data accumulated through the first two funding rounds.
Under the CARES Act, PPP borrowers were originally limited to obtaining a single loan. The Economic Aid Act changed that. In addition to opening a new round of PPP lending to new borrowers – “First Draw” borrowers – the Economic Aid Act permitted prior borrowers to pursue a loan – “second Draw” PPP borrowers. This expansion of the PPP program introduces lenders to a new category of borrowers: those that previously applied for and either did or did not (for whatever reason) receive a PPP loan. What does this mean for lenders from a Bank Secrecy Act/Anti-Money Laundering (“BSA/AML”) perspective? Information.
Continue Reading New PPP Procedural Requirements Reflect Lenders’ Emerging AML Duties