Non-bank Lenders Should Submit Suspicious Activity Reports says FinCEN

The Financial Crimes Enforcement Network (FinCEN) is proposing that non-bank residential mortgage lenders and originators establish anti-money laundering (AML) programs and comply with suspicious activity report (SAR) regulations.

Already required from other types of financial institutions, FinCEN said the proposal could close a regulatory gap that allows other originators, such as mortgage brokers and mortgage lenders not affiliated with banks, to avoid having AML and SAR filing obligations.

“These lenders and originators generally deal directly with consumers. As important mortgage finance providers they are ideally positioned to assess and identify money laundering risks and possible mortgage fraud. This protects both their business interests and their customers from the abuses of fraud and financial crime,” said FinCEN Director James H. Freis, Jr.

According to FinCEN, the proposal would be consistent with those business’s due diligence and information collection processes to assess creditworthiness in lending, and could augment FinCEN’s initiatives in this area.  Additionally, analysis of SARs shows that non-bank mortgage lenders and originators initiated many of the mortgages that were associated with the fillings.

Earlier this year, FinCEN began requesting financial institutions to include any fraud related to reverse mortgages in their reports. Law enforcement and HUD officials said they identified new trends and schemes involving thefts from seniors by family members, loan officers, and others as well as the use of unsuspecting seniors in property flipping and other HECM-related fraud schemes.

Comments are due to FinCEN within 30 days after publication in the Federal Register.