Happy January 18th everyone. It’s national Michigan day! Fun fact about America’s Credit Unions’ compliance team, one third of our team members live in Michigan. Did you know, people who live in Michigan are called Michiganders. Did you also know that on January 12, 2024, FinCEN released an updated Paycheck Protection Plan (PPP) FAQ? Specifically, FinCEN added Question 5:
“SBA Procedural Notice 5000-835955 states that a PPP lender may request a guaranty purchase (without charge-off) from the SBA when the lender “has filed a Suspicious Activity Report (SAR) with respect to the PPP loan.” Is a PPP lender permitted under the BSA and its implementing regulations to reveal the existence of a SAR to the SBA when requesting a guaranty purchase (without charge-off) pursuant to SBA Procedural Notice 5000-835955? Answer:
Yes. Consistent with the BSA and FinCEN’s implementing regulations, a PPP lender may reveal the existence of a SAR to the SBA when requesting a guaranty purchase (without charge-off) from the SBA. This FAQ does not address any circumstances other than those described in SBA Procedural Notice 5000-835955.”
According to Question 5, a credit union is permitted to reveal the existence of a suspicious activity report (SAR) when requesting a guaranty purchase (without charge-off) from the Small Business Administration (SBA). Why is this important? It all goes back to COVID.
Under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, and as amended by later acts, the SBA was authorized to guarantee PPP loans. Under the Act and implementing regulations, a lender has 180 days after maturity of the PPP loan to request SBA purchase the guaranty. As such, it is important that credit unions properly request the purchase guaranty in a timely fashion. There are several methods a lender can request a guaranty purchase, as is listed in SBA Procedural Notice 5000-835955. However, here is the method that requires a SAR to have been filed:
“…a Lender may request guaranty purchase (without charge-off) of a PPP loan if:
• The Lender has filed a Suspicious Activity Report (SAR) with respect to the PPP loan; and
• A Lender request for forgiveness payment or an SBA loan review has been pending with SBA for more than 12 months. In this circumstance, the lender should contact SBA through the Platform Inbox to coordinate submission of the guaranty purchase request. If SBA purchases the guaranty while a Lender request for a forgiveness payment or an SBA loan review decision has been pending with SBA for more than 12 months and SBA determines that the borrower is eligible for loan forgiveness in any amount, SBA will not remit a forgiveness payment to the Lender. Instead, the SBA-approved forgiveness amount will be applied to reduce the outstanding amount of the loan owed by the borrower.” (Emphasis added).
Under the updated FinCEN FAQ, FinCEN makes clear that lenders are permitted to acknowledge the existence of a SAR pursuant to the circumstances discussed in the SBA notice. This is an important acknowledgement and clarification as SARs are confidential and credit unions are generally prohibited from even revealing the existence of a SAR except to a federal regulatory authority that examines the credit union for BSA compliance and appropriate law enforcement. If credit unions have filed a SAR with respect to a PPP loan, now might be a good time to review whether the credit union may request a guaranty purchase (without charge-off).
Credit unions may also want to note that SBA Procedural Notice 5000-835955 expired on October 1, 2023. Hopefully the SBA will release new guidance soon and FinCEN will further update the FAQ so that it is not specifically referring to expired guidance. If credit unions have questions regarding PPP loans and the guidance, they can contact the Lender Relations Specialist in the local SBA Field Office, which can be found at https://www.sba.gov/tools/localassistance/districtoffices.