Loan to San Bernardino Attacker Generates New Focus on Online Marketplace Lending and Terrorism Financing

Morrison & Foerster LLP

News that an online marketplace lender extended a $28,500 loan to Syed Rizwan Farook, one of the alleged San Bernardino attackers, just two weeks before the attack, has spurred House Financial Services Committee Chairman Jeb Hensarling (R-TX) to announce plans to propose new terrorist financing legislation in the coming months. On December 10, 2015, Chairman Hensarling announced that such legislation will be a top priority for the coming year and that a bill will be introduced in early 2016. A day earlier, the House Financial Services Committee voted to reestablish its Task Force to Investigate Terrorism Financing (“Task Force”), and the Task Force requested information from the U.S. Department of the Treasury (“Treasury”) about the regulation of online lenders in the wake of the attack.

Online lending platforms, including the platform used by the alleged San Bernardino attacker, generally partner with banks to originate loans. And, loans originated by a bank through an online lending platform are subject to anti-money laundering and anti-terrorism financing obligations under the Bank Secrecy Act, USA PATRIOT Act and other federal laws that apply to such bank-originated loans. These obligations include verifying a borrower’s identity, determining whether a borrower is on certain watch lists (e.g., the Office of Foreign Assets Control’s Specially Designated Nationals list), and filing suspicious activity reports, where appropriate. While non-bank online lending platforms may not be directly subject to these obligations, these platforms are generally obligated by agreement to assist the originating bank in fulfilling its anti-money laundering and anti-terrorism financing obligations.

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