FinCEN Proposes AML Plan for Non-Bank Mortgage Lenders and Originators

Dec 08, 2010   

On December 6, 2010, the Financial Crimes Enforcement Network (“FinCEN”) of the United States Department of the Treasury announced a proposed rule that would require non-bank residential mortgage lenders and originators to establish anti-money laundering (“AML”) programs and comply with suspicious activity report (“SAR”) regulations. The announcement comes as FinCEN leads an inter-agency effort, along with the Department of Justice and the Federal Trade Commission, targeting foreclosure rescue scams and loan modification fraud. A full copy of the proposed rule can be read here.

Currently, the only mortgage originators that FinCEN regulations require to file SARs are banks and insured depository institutions. The proposed rule would extend AML program and SAR reporting compliance requirements to those mortgage brokers and lenders not affiliated with banks that, under current law, have been able to avoid such requirements. FinCEN believes that the proposed AML and SAR requirements are consistent with these non-bank institutions due diligence and information collection processes to assess creditworthiness when lending. Additionally, FinCEN believes that the effectiveness of the proposed regulations will be enhanced by the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (“SAFE Act”). The SAFE Act requires the development of a nationwide licensing system and registry for certain mortgage professionals including loan originators, processors, and underwriters.

Under the Bank Secrecy Act, FinCEN can issue regulations requiring financial institutions to keep records and file reports determined to have a high degree of usefulness in criminal, tax, or regulatory investigations or proceedings. One of the key weapons in FinCENs arsenal for investigating and combating mortgage fraud is the SAR. FinCEN mortgage fraud reports have found that non-bank mortgage lenders and originators initiated many of the mortgages that were associated with SAR filing. FinCEN believes that the proposed AML and SAR requirements will help mitigate some of the activities, such as false statements, straw buyers, fraudulent flipping and identity theft, that criminals have exploited when committing mortgage fraud.

If you have questions pertaining to FinCEN regulations, anti-money laundering compliance or how to ensure that your business maintains regulatory compliance, contact Fuerst Ittleman PL at