FinCEN Final Rule Requires AML Programs and SAR Filing for Non-Bank Mortgage Lenders and Originators

Feb 15, 2012   
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On February 7, 2012, the Financial Crimes Enforcement Network (“FinCEN”) announced final rules requiring non-bank residential mortgage lenders and originators to establish anti-money laundering (“AML”) programs and comply with suspicious activity report (“SAR”) regulations. The final rule will be effective 60 days after its publication in the Federal Register. A copy of the final rule can be read here.

As we previously reported, prior to the finalization of this rule, the only mortgage originators that FinCEN regulations required to file SARs were banks and insured depository institutions. However, FinCEN mortgage fraud reports have shown that non-bank mortgage lenders and originators initiated many of the mortgages that were the subject of bank SAR filings. By extending AML and SAR requirements to non-bank mortgage lenders and originators, FinCEN hopes to mitigate and minimize the risks and vulnerabilities that have been exploited by criminals in the past including false statements, straw buyers, fraudulent flipping, and identity theft. As explained by FinCEN, “the new regulations likely will significantly increase the number of mortgage related SAR filings; give law enforcement and regulators more comprehensive data on specific crimes; and provide government and industry a more complete perspective on mortgage related crime trends nationwide.”

The new rules come as part of a broader effort by FinCEN and multiple federal agencies to combat mortgage fraud. Since 2009, the Financial Fraud Enforcement Task Force has coordinated multiple federal agencies, the Department of Justice and State and local law enforcement partners in collaborative efforts to prosecute mortgage fraud and financial crimes. On November 3, 2011, FinCEN announced a proposal to extend AML and SAR compliance requirements to Fannie Mae, Freddie Mac, and Federal Home Loan Banks. Most recently, in January 2012, the Department of Justice announced the creation of the joint DOJ and SEC Residential Mortgage-Backed Securities Working Group which will focus its efforts on prosecuting abuses in the residential-mortgage backed securities market.

The compliance date for the new rule is six months after its publication in the Federal Register. 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