For the first time, all non-bank residential mortgage lenders and originators (RMLOs) are required to file mandatory and voluntary Suspicious Activity Reports (SARs) with the government through the e-filing system established by FinCEN. Similar to the establishment of an AML program, compliance for this regulation is August 13, 2012.
A company may file a voluntary report with FinCEN to alert them of any suspicious transaction they have reason to believe is a possible violation of any law or regulation, without any de minimus amount. A company must file a SAR once they have become aware of a transaction that:
Is conducted or attempted by, at, or through a RMLO
Involves or aggregates funds or assets of at least $5,000
The RMLO knows, suspects, or has reason to suspect that the transaction or pattern of transactions:
Involves funds derived from illegal activity or conducted to hide funds or assets derived from illegal activity
Is designed to evade BSA requirements
Has no business or apparent lawful purpose, i.e., “doesn’t look right”
Involves the use of the company to facilitate criminal activity
According to Howard Eisenhardt, Counsel in BuckleySandler’s Washington, DC office, “At the heart of a company’s AML program is compliance with the requirement to file SARs to report known, attempted, or suspected crimes and suspicious transactions that involve money laundering or other illegal activity.”
There isn’t a checklist available to help you determine when a SAR should be filed. Instead, the determination is based on all the facts and circumstances relating to the transaction and customer of the RMLO in question. The FFIEC and Fannie Mae both have lists of red flags for mortgage transactions that can be reviewed. Should a company file a SAR, the SAR and the information provided must be kept confidential and must not be disclosed except as authorized.
“FinCEN wanted RMLOs to have the requirement to file SARs,” explains Eisenhardt. “SARs provide the government with the ability to gather information and open an investigation. The government is anticipating that the filing of additional SARs identifying potential mortgage fraud will lead to a greater ability stop or control money laundering and mortgage fraud.”
FinCEN believes that much of the effort necessary to meet these regulatory obligations of implementing an AML program and filing SARs will be accomplished through business operations already taking place, including SAFE Act requirements and fraud monitoring tools that are already in place. However, Eisenhardt cautions, “there are several challenges for RMLOs to overcome, including the short timeframe, limited financial resources, new training requirements, and inexperienced personnel who must learn a completely new area which they’ve never faced before.”