Anti-Money Laundering Debuts
for Nonbank Mortgage Companies  
 Magazine Article  
Article - Excerpts
Who is Covered?
AML Program
Suspicious Activity Report




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You may be interested in reading my magazine article:Back
Anti-Money Laundering Debuts for Nonbanks  
It is published in the National Mortgage Professional Magazine,
                                       (Free Subscription to Our Clients and Subscribers.)

For the first time, the Financial Crimes Enforcement Network, known as "FinCEN," will require nonbank mortgage lenders and originators to implement an Anti-Money Laundering program ("AML Program") and file Suspicious Activity Reports ("SARs") for certain loan transactions.

FinCEN is establishing this AML program in accordance with the Bank Secrecy Act ("BSA").  

The AML Program requirement provides that the guidelines are effective on April 16, 2012, and the effective compliance date is August 13, 2012. 

The AML program and SAR filing regulations, which I refer to as "FinCEN's rule," are considered to be "the first step in an incremental approach to implementation of regulations for the broad loan or finance company category of financial institutions."

At this time, residential mortgage lenders and originators, which includes mortgage brokers, must seek to establish a viable AML Program, complete with policies, procedures, training, and an independent testing component.

As we continue to undergo profound regulatory changes in mortgage banking, it is more important than ever to institute reliable risk management practices and proactively implementing the required regulatory compliance mandates.

I hope you enjoy the article. You are our valuable client and we are here to help support your mortgage compliance needs. We welcome our newsletter subscribers, as well.

Please feel free to contact me at any time to discuss this subject or any other matter.

Jonathan Foxx
President and Managing Director 
Who Is Covered?

Request Article-2

The Bank Secrecy Act defines the term "financial institution" to include, in part, a loan or finance company. This terminology, however, can reasonably be construed to extend to any business entity that makes loans to or finances purchases on behalf of consumers and businesses.  


Thus, nonbank residential mortgage lenders and originators, and mortgage brokers, are grouped into the "loan or finance company" category.[i] However, the term ''loan or finance company'' is actually not concisely defined in any FinCEN regulation, and there is no legislative history on the term itself. Nevertheless, FinCEN is applying this term to extend to any business entity that makes loans to or finances purchases on behalf of consumers and businesses. [ii]  


Therefore, residential mortgage lenders and originators ("RMLOs") are covered by the scope of the ''loan or finance company'' term. I use the acronym "RMLO" in this article, inasmuch as my principal focus herein relates to residential mortgage lenders and originators.

[i] 31 U.S.C. 5312(a)(2)(P)

[ii] The definition of "loan or finance company" initially includes only these businesses, but is broad enough to permit the addition of other types of loan and finance related businesses and professions in future rulemaking. Though not included in the definition of "loan and finance companies," FinCEN has also proposed AML and SAR reporting rules for the GSEs. Where fraud is suspected by a GSE, there is an established procedure, currently set forth in a Memorandum of Understanding between FinCEN and the Federal Housing Finance Agency (''FHFA'') for the GSE to report to the FHFA, which then reports the suspicious activity to FinCEN.

AML Program

Request Article-2 The AML Program covers any business that, on behalf of one or more lenders, accepts a completed mortgage loan application, even if the business does not in any manner engage in negotiating the terms of a loan. Also covered are businesses that offer or negotiate specific loan terms on behalf of either a lender or borrower, regardless of whether they also accept a mortgage loan application.

Note that the word "accept" is intended to differentiate the FinCEN rule from the SAFE Act. FinCEN is ensuring that persons who either accept an application or offer or negotiate the terms of a loan are covered.

Furthermore, the AML rule applies to residential mortgage originators, regardless of whether they receive compensation or gain for acting in that capacity.
Suspicious Activity Report
Request Article-2
Let us take a close look at the form that must be filed with FinCEN. This form is called the Suspicious Activity Report, known as a SAR. FinCEN had considered requiring RMLOs to use Treasury SAR Form TD F 90-22.47, the form presently used by banks and other insured depository institutions.[i]  


For FinCEN's purposes, the information required for a SAR from an RMLO would be substantially the same as that required of banks and other depository institutions that make mortgage loans and use SAR Form TD F 90-22.47.[ii]  


The Federal financial institutions' regulatory agencies, the U S Departments of Justice, and the Treasury, may use and share the information collected on a SAR.


In my experience with bank clients, the time required for collecting information averages thirty to forty-five minutes per SAR response, and that includes the time to gather and maintain data in the required SAR report, review the instructions, and complete the report's fields.  


I think the same time frame will likely apply to nonbank SARs.

[i] This report is required by law, pursuant to authority contained in the following statutes. Board of Governors of the Federal Reserve System: 12 U.S.C. 324, 334, 61 1a, 1844(b) and (c), 3105(c) (2) and 3106(a). Federal Deposit Insurance Corporation: 12 U.S.C. 93a, 1818, 1881-84, 3401-22. Office of the Comptroller of the Currency: 12 U.S.C. 93a, 1818, 1881-84, 3401-22. Office of Thrift Supervision: 12 U.S.C. 1463 and 1464. National Credit Union Administration: 12 U.S.C. 1766(a), 1786(q). Financial Crimes Enforcement Network: 31 U.S.C. 5318)(g).

[ii] For a copy of SAR Form TD F 90-22.47, click HERE. [PDF] 



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