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FinCen Finalizes Anti-Money Laundering Program for Non-Bank Lenders and Originators

February 9, 2012

The Financial Crimes Enforcement Network (FinCEN) finalized regulations that require non-bank residential mortgage lenders and originators to establish anti-money laundering (AML) programs and file suspicious activity reports (SARs), as FinCEN requires of other types of financial institutions.

“FinCEN is closing a regulatory gap by requiring non-bank mortgage lenders and originators to develop anti-money laundering programs and file suspicious activity reports with FinCEN,” said FinCEN Director James H. Freis, Jr. “Suspicious activity reports are a critical source of information to law enforcement and regulatory agencies in their investigation and prosecution of mortgage fraud and a wide range of other financial crimes.”

Based on FinCEN’s ongoing work directly supporting criminal investigations and prosecutions, including in connection with the Financial Fraud Enforcement Task Force and recently the Residential Mortgage-Backed Securities Working Group as well as other anti-fraud efforts, FinCEN believes that the new regulations will help mitigate some of the risks and minimize some of the vulnerabilities that criminals have exploited in the non-bank residential mortgage sector. Analysis of SARs reported in FinCEN’s annual, quarterly and special fraud reports, shows that independent mortgage lenders and brokers originated many of the mortgages that were the subject of bank SAR filings.

In a further step to combat fraud in the residential mortgage markets, FinCEN issued a proposal in November 2011 that would require the Federal government sponsored enterprises Fannie Mae, Freddie Mac, and the Federal Home Loan Banks to develop AML programs and file SARs with FinCEN.

Taken together, the final rules and the proposed rules issued in November provide additional tools for financial institutions and law enforcement to hold scammers accountable for their fraud and other financial crimes, according to FinCen. Among the many mortgage related scams FinCEN has identified in its reports are false statement, use of straw buyers, fraudulent flipping, flopping, and identity theft. 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 final rule will be effective 60 days after publication in the Federal Register and is available on www.FinCEN.gov. The compliance date for this final rule is six months after publication in the Federal Register.



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