A bureau of the U.S Treasury Department may require mortgage brokers and independent mortgage banking firms to comply with the Bank Secrecy Act and set up anti-money laundering programs and file suspicious activity reports for the first time.
These firms rarely deal with large currency transactions, but the Financial Crime Enforcement Network (FINCEN) bureau views suspicious activity reports (SARs) as a "critical source of information" for investigating and prosecuting mortgage fraud.
Most financial institutions are subject to the BSA. But when it comes to mortgage companies, only the residential subsidiaries of banks are required to report large currency transactions of $10,000 or more and file suspicious activity reports.
Analysis of suspicious activity reports (SARs) "shows that non-bank mortgage lenders and originators initiated many of the mortgages that were associated with SAR filings," FINCEN says in issuing the notice of proposed rulemaking for a 30-day comment period.
FINCEN received nearly 67,400 SARs relating to mortgage fraud in 2009.
In July 2009, FINCEN issued a preliminary proposal to solicit public comment on expanding its money laundering and SAR regulations to loan and finance companies. But now the bureau has decided to focus solely on brokers and independent mortgage bankers.
This "incremental approach," FINCEN says, complements ongoing mortgage reform efforts and will guard against mortgage fraud involving false statements, straw buyers, fraudulent property flipping and identity theft.
Mortgage bankers and brokers are "ideally positioned to assess and identify money laundering and possible mortgage fraud," said FINCEN director James Freis.
