November 16, 2011

Nonbank Mortgage Lenders, Prepare for FinCEN!

Nonbank mortgage lenders will soon be "deputized" by the federal government to help fight financial crime in the same way banks currently are.

Almost a year ago, the Financial Crimes Enforcement Network (FinCEN) proposed new regulations to require non-depository residential mortgage lenders (and mortgage loan originators) to establish programs to detect and report financial crimes, including by filing Suspicious Activity Reports (SARs).  (That proposal is available here.)  After receiving 13 comment letters from concerned parties, Director James Freis, Jr. reports his agency has nearly finished preparing the final regulations.

FinCEN's explanation for expanding the requirements to non-depository mortgage lenders is as follows:

"There has been a regulatory gap between the [Bank Secrecy Act's] coverage of depository institutions and residential mortgage lenders and originators in that the latter are currently not subject to BSA requirements, the Suspicious Activity Report (‘‘SAR’’) foremost among them. Imposing a SAR requirement would address this regulatory gap. Moreover, a SAR requirement would potentially expand the kinds of activities being reported to FinCEN’s BSA database, thereby giving our regulatory and law enforcement partners a more complete picture, both on a systemic and case-specific level, of mortgage-related financial crimes."

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