Anti Money Laundering (AML) and Suspicious Activity Report (SAR) Proposal For Lenders and Brokers:

Financial Crimes Enforcement Network (Fin CEN) issued a notice of proposed rule(NPR) 12/6/10 to require ‘a loan or finance company’ to comply with Anti-money laundering programs and SAR reporting. (Yes, this would include lenders and brokers). The Secretary has authority to do so under the Bank Secrecy Act. They tried this in 2002 and it was pulled back to conduct studies on the impact lenders have in this area as well as the extent to which the requirements should apply. FinCen believes the information is important for law enforcement in investigating and prosecuting mortgage fraud related to financial crimes. For those not familiar with the regulations, here are a few bullet points: AML programs require:
  • Internal policies and procedures insuring money laundering is prevented, detected, corrected, reported;
  • Adesignated compliance officer;
  • Ongoing employee training;
  • Independent audit functions to test programs
SAR programs require:
  • Reporting of any suspicious transaction relevant to a possible violation of law or regulation.
The last time this topic was open for public comment in an ANPR in 2009 they received only 12 comments. FinCEN wants to know about the procedures lenders have put in place to prevent fraud and how the information gained from these activities can be collected. The proposal uses a $5,000 minimum amount (aggregate though)in funds or other assets (not just currency) to trigger reporting. Other suspicious transactions are encouraged to be reported as well. The law protects those who report. It means FinCEN will be auditing lenders and brokers. Info is kept confidential so reporting borrower misrepresentation doesn’t stop the borrower from going down the street. A phased in approach is proposed and would target lenders/brokers first then add consumer finance companies.  Comment period is open until 2/7/2011.