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Having an Anti-Money Laundering Policy

NOV 1, 2012 4:38pm ET
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DO YOU HAVE YOUR ANTI-MONEY LAUNDERING MANUAL IN PLACE?

FACTS

The Department of Justice is taking a different track to track and prosecute money laundering that occurs through financial institutions. Instead of focusing on money laundering that results from criminal violation federal prosecutors are looking at weaknesses in the internal procedures employed by financial institutions to prevent laundering.

Many laws govern financial institutions about reporting certain financial transactions. These laws are primarily under the Bank Secrecy Act and its regulations that require financial institutions to report certain transactions over $10,000l. This is true even when the transactions are broken up. For example many banks such as Wells Fargo are purportedly reporting cash deposits at the $2,500 level pursuant to the Bank Secrecy Act. This is true even though the threshold is $10,000. Financial institutions including mortgage loan originators and lenders as of August are required to report suspicious transactions and file the appropriate Suspicious Activity Reports for suspicious transactions that may relate to money laundering activity. Financial institutions also are required to develop, implement and maintain effective anti-money laundering programs and have appropriate manuals designed to prevent the institution from being used to facilitate money laundering.

Federal and state prosecutors have reached settlements with large international banks, including ING and the British bank Standard Chartered, for their sanctions busting transactions with countries such as Cuba and Iran.

The Justice Department is now examining whether a financial institution’s AML processes are compliant. Federal prosecutors are charging financial institutions with an overall failure to maintain an effective program to prevent money laundering. In June the Justice Department brought criminal cases against check-cashing businesses and their owners for failing to implement effective AML programs.  (102412rjarnelo)

MORAL

Are you a mortgage broker or a mortgage lender? As of August regulations required you to have an AML manual in place to check for and report not only money laundering but also suspicious activity. I wonder if know that the regulators that license your business may ask you for the manual as part of their compliance audit of your business. CALIFORNIA STATE BAR ACCUSES LAWYER OF LOAN MODIFICATION MISCONDUCT

FACTS

The California State Bar Association has charged Stephen Lyster Siringoringo with 20 counts of charging advance fees for mortgage modifications in violation of SB 94, a 2009 consumer protection law.

The formal disciplinary complaint was filed the week of Oct. 8. The disciplinary complaint also accuses Siringoringo of sharing fees with non-lawyers and of committing acts of moral turpitude.

It is alleged Siringoringo heavily advertised his modification services according to the State Bar which allegedly has added a “Consumer Alert” to the top of Siringoringo’s member listing on the State Bar website announcing that he had been charged with 15 or more instances of loan modification misconduct.

According to the complaint, Siringoringo charged three couples and 17 other homeowners between $1,995 and $7,000 to modify their mortgages. The complaint states according to the Bar that he took payments from them, even thought he had not completed all the contracted for services. SB 94 refers to a California Civil Code Section prohibits anyone, including attorneys, from being paid for any sort of mortgage modification or forbearance work until after the person has fully performed each and every service that person contracted to perform.  The law became effective in October 2009.

According to the complaint two months after the law took effect, Mr. Siringoringo formed a partnership with a pair of non-lawyers, Alfred Clausen and Josh Cobb to handle modification matters even though he knew the pair had improperly operated law offices for other lawyers previously.

Sometime after the December 2009 agreement it is alleged that Clausen and Cobb opened and staffed offices in Upland, Rancho Cucamonga and Glendale. In exchange Siringoringo is alleged to have agreed to pay them a specified percentage of the legal fees revenue generated. Siringoringo is also accused of habitually disregarding the modification law practice in the three offices even though clients believed that a lawyer was helping them.  (In re Siringorigo, 11-O-8390 (Sate Bar Court, filed October 10, 2012).

MORAL

The only good thing out of this may be if the people that lost the money can prove it they may be able to recover the money by filing a Claim with the State Bar Recovery Fund.

CFPB NOW TAKES COMPLAINTS ON CREDIT REPORTS WHERE CREDITORS DO NOT FIX THEIR ERRONEOUS REPORTS TO THE BUREAUS

FACTS

The Consumer Financial Protection Bureau now allows consumers to elect to describe his or her complaint such as: (1) incorrect information on the consumer’s credit report; (2) a consumer reporting agency’s investigation; (3) improper use of a credit report; (4) inability to obtain a credit report or credit score; and (5) problems with credit monitoring or identity protection services.

This expansion of the CFPB’s complaint system will impact consumer reporting agencies who are the subject of complaints, and in particular, those consumer reporting agencies as well as other companies that report to such agencies or use consumer reports. Complaints about bank or other companies could result in targeted CFPB examinations.

MORAL

Now the consumer can complain on line using the CFPB website.  That is certainly going to make the creditors and credit reporting agencies sit up and take notice. The consumer has an easy way to complain from home online.

ONLY ONE OUT OF 24 ACQUITTED IN SAN DIEGO MORTGAGE FRAUD CASE

FACTS

On Oct. 12, a federal criminal case filed in San Diego federal court three years ago had named 24 people, including a documented Lincoln Park gang member, in a scheme that prosecutors said netted the group some $11 million in fraudulent profits ended with a jury verdict that found one person guilty and one that was totally acquitted.

Real estate escrow officer Billie Bishop was found not guilty in the jury trial. The co-defendant that went to trial with her was convicted of making a false statement to a bank. Bishop was the only defendant who was cleared. She had been charged with wire fraud and making a false statement to a bank.

Prosecutors had alleged that Bishop played a key role in the scheme by processing 77 fraudulent real estate transactions. The scheme involved the ring paying more than the asking price for homes. The extra amount was supposed to go into an account for construction upgrades, though it was actually controlled by gang member Darnell Bell. No upgrades were ever made; instead, the funds were pocketed. The homes, many of which were bought with no money down, went into foreclosure because the straw buyers walked away from them.

Bishop’s attorney, Gastone Bebi, said prosecutors couldn't prove to the jury that she knew the construction work wasn't being done. The total escrows she processed amounted to less than 20% of her business, he said, and she had no idea the scheme was a fraud.  (sduntr102112)

MORAL

I would say Bishop had one darned good attorney.

COLORADO WOMAN GETS TWO YEARS IN FEDERAL PRISON FOR MORTGAGE FRAUD

FACTS

Kathy J. Mascarenas, also known as Kathy Oliver, was sentenced by U.S. District Court Judge Blackburn to serve 24 months in federal prison for wire fraud. Following her prison sentencing, Mascarenas was ordered to spend three years on supervised release. Judge Blackburn also ordered Mascarenas to pay restitution totaling $1,776,162.21. She will surrender to the Bureau of Prisons once a facility is designated.

Kathy Mascarenas pled guilty to two counts of wire fraud on March 20. She was indicted on April 22, 2010 along with co-defendants Steven Mascarenas and Katrina Roberts. Roberts was sentenced to 20 months in prison on July 27. Steven Mascarenas plead guilty on July 12 and is scheduled to be sentenced by Judge Blackburn on Nov. 16.

Beginning on Dec. 1, 2004 and continuing until Feb. 28, 2007, Kathy Mascarenas and a co-defendant assisted Steven Mascarenas in devising a scheme to defraud lenders that funded mortgage loans and for obtaining money from them by means of false pretenses. Specifically, Kathy Mascarenas conducted financial transactions as necessary to facilitate, perpetuate, and conceal the mortgage fraud as it related to the sale of residences.

She put false information on applications when she purchased two of the houses involved in the scheme. She issued checks and purchased cashier’s checks for the buyers’ earnest money and down payments; she issued checks and obtained a cashier’s check to compensate the buyers for their participation; and she deposited loan proceeds into accounts under her control.

She used entities which concealed Steven Mascarenas’ involvement as the orchestrator of the scheme and obscured the extent of her own involvement. She sometimes used her maiden name, Kathy Oliver, or entities created under that name.

Roberts prepared appraisal reports for the purpose of the six properties in the scheme. In them, she falsely represented that the fair market values of the properties were from $100,000 to $325,000 great than their actual sales prices. To make the inflated values appear legitimate, Roberts falsely represented that purchases, which were actually sales at market value, were “distressed” sales or “quick” sales below market value, and that the properties had been “exposed on the open market at below market value.”

The loss amount is approximately $1,776,671.73 from the scheme.  (usattyco103012)

MORAL

Note two things. One is that the federal prosecutor is chasing loans that funded eight years ago. Two when a person does mortgage loans the use of the mails, telephones, faxes and Internet, the federal prosecutors charge them with mail and/or wire fraud. But it all amounts to mortgage loans that funded eight years ago as mortgage fraud. Why don’t you think NINA, SISA loans and start to wonder?

FLORIDA MAN PLEADS GUILTY TO SHORT SALE FRAUD

FACTS

On Oct. 30, Guerard Wallace Howard pleaded guilty to one count of wire fraud; he faces a maximum penalty of 20 years in federal prison. His sentencing hearing is scheduled for Jan. 16, 2013, before Senior U.S. District Judge G. Kendall Sharp.

Between November 2007 and August 2011, Howard operated Provincial Real Estate Administrative Services Inc. Using Provincial, Howard made properties appear to be in poor condition during appraisals, through a scheme known as reverse staging. Reverse staging is a process wherein someone manipulates the short sale price by intentionally downgrading a property’s appearance and falsely representing the condition of a property in advance of bank appraisals.

Reverse staging is done in an effort to acquire the property at below market price. In this case, it included Howard removing receptacle plates and pulling wires from the walls to falsely represent to an appraiser that the house required rewiring, electrical service upgrades, and repair work. In some instances, it also involved spraying the house with a foul-smelling prank product and falsely representing to an appraiser that the odor was due to mold or other potential biohazard issues that required expensive remediation costs. The reverse staging effectively caused the lender to agree to the below market offer made by Howard through Provincial. The property was then immediately resold at a profit.

In addition to reverse staging, Howard also engaged in an illegal scheme known as commission shifting, whereby Realtor commissions that should have been borne as an expense in the resale transaction were paid as part of the short sale transaction. The shifting of these costs, from the resale to the short sale, resulted in the short sale lender bearing Realtor commission costs that should have been borne by Howard. This resulted in a higher profit to Howard, to the detriment of the short sale lender. Howard illegally obtained $219,414.52 during the short sale flipping of 13 properties in Brevard County.  (usattyndfl103012)

MORAL

This is one form of short sale fraud. Another is when the real estate agent that lists the REO property bids on it through a straw buyer at a price below market and immediately resells it to a legitimate buyer that the agent has an offer from at a higher price. They get caught because of the paper trail.

 THREE SENTENCED IN FLORIDA FOR MORTGAGE FRAUD

FACTS

On Oct. 26, U.S. District Court Judge Elizabeth A. Kovachevich sentenced George Cavallo, his wife, Paula Hornberger, and Joel Streinz, a former police officer, to federal prison for their roles in a Sarasota-area mortgage fraud scheme to commit wire fraud and to make false statements on loan applications that were submitted to FDIC-insured financial institutions and mortgage lenders. The three individuals were convicted earlier this year following a three-month jury trial.

Streinz, who took out more than $6.2 million in fraudulent loans, was sentenced to five years in federal prison. He was also ordered to pay $1,072,676.31 in restitution.

Cavallo and Hornberger, who collectively took out more than $8.3 million in fraudulent loans, were sentenced to 10 years and one year and one day respectively and ordered to pay $13.2 million in restitution.

Cavallo, Hornberger and Streinz conspired with each other and with numerous other individuals to purchase residential property in the Sarasota area by making false statements on loan applications submitted to various FDIC-insured banks and mortgage lenders. The false statements made and caused to be made pertained to, among other things, the property’s actual purchase/sale price; the purchaser/borrower’s intended use of the property; the purchaser/borrower’s employment, income, assets, and liabilities; and the amount and source of the equity contributed to the purchase by the purchaser/borrower.

The idea behind the scam was to fraudulently obtain the maximum loan possible on each property and then to sell that property within a few years after it had appreciated without risking much, if any, of their own money. The conspiracy began in the late 1990s and then grew slowly until 2004, when it exploded with the drastic increase in real estate prices in Sarasota. The conspiracy ended, when the real estate market collapsed in 2008.  (usattymdfl102912)

MORAL

Notice how this one began in the 1990s! That is 22 years ago. Now one of them gets room and board for ten years in a federal hotel. One gets five years in the same hotel and one gets a year and a day. I wonder who cooperated with the federal investigators.

NEW YORK MAN PLEADS GUILTY IN FLORIDA COURT TO $39 MILLION MORTGAGE FRAUD

FACTS

On Oct. 18, Juan Carlos Sanchez pleaded guilty in a South Florida Federal Court in connection with his participation in a $39 million mortgage fraud scheme. Sanchez pled guilty before the U.S. District Judge William J. Zloch to count one of the indictment, which charged him with conspiracy to commit mail and wire fraud. Sentencing is scheduled for Jan. 3, 2013, in Fort Lauderdale.

Sanchez was originally indicted with seven others for fraudulently obtaining mortgages for the purchase of condominium units at Marina Oaks Condominiums in Fort Lauderdale.

So far, Celeste Mota and David Arboleda pled guilty in 2012, and are awaiting sentencing scheduled for Nov. 28 and Dec. 12 before Judge Zloch. In addition, on Sept. 5, 2012, defendant Sandra Campo arrived at Miami International Airport from Colombia, and surrendered to agents of the Federal Housing Finance Agency Office of Inspector General and the Broward Sheriff’s Office to face the charges in the indictment.

Trial for the remaining defendants is scheduled for Jan. 14, 2013.  According to the indictment, from January 2007 through November 2008, the defendants conspired to recruit individuals who would be willing to purchase condominium units at Marina Oaks Condominiums. These buyers were promised a “buyers’ incentive,” which payment was not disclosed to the lenders or reflected on any of the closing documents. The conspirators would then prepare materially false mortgage applications as to facts regarding the borrowers’ credit worthiness in order to qualify the borrowers for mortgages to purchase the Marina Oaks Condominiums.

The conspirators would allegedly also create false documents to support the mortgage applications. Once the loans closed, the conspirators would divert portions of the mortgage proceeds for their personal use and benefit. The indictment alleges that the conspirators obtained approximately $39 million in fraudulent mortgage loans.  (usattysdfl101812)

MORAL

Sanchez is certainly no piker—$39 million is nice money, but if and only if, you can get it without going to prison. Notice the loans being investigated go back to 2007. So if anyone did “creative” loans in 2007 or later, I suggest you see your attorney now rather than later.  As an additional thought, HUD is investigating its FHA loans and so the audits are becoming more frequent as are my trips out of town to see if Direct Endorsement lenders are in compliance.

NEW JERSEY NOW MAKES IT MORE DIFFICULT TO FORECLOSE

FACTS

The decision by the New Jersey Appellate Division in the case Deutsche Bank National Trust Co. v. Mitchell, A-4925-09 stated that in residential foreclosure cases, the mortgage lender must provide evidence that it actually possesses the mortgage note or an assignment of this mortgage note before it files the foreclosure complaint. “If Plaintiff did not have the note when it filed the original complaint, it lacked standing to do so, and it could not obtain standing by filing an amended complaint.” The Appellate Court cited to the case of Wells Fargo Bank v. Ford, 418 N.J.Supr. 592 (App. Div.2011), which held that a party seeking to foreclose a mortgage must own or control the underlying debt. (Deutsche Bank National Trust Co. v. Mitchell, A-4925-09) 

MORAL

It does give a negotiating tool to use in favor of the owner.  If you are the holder of the “paper” make sure by inventorying your New Jersey Portfolio if you have delinquent loans.

 

THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.  AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE.

 

 

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