Tips for Mortgage Broker Companies: Anti-Money Laundering (AML) Program and Suspicious Activity Reports (SAR)

**This is NOT legal advice, it is simply a general overview.**

What is the Bank Secrecy Act?

The Bank Secrecy Act (BSA) has been around for decades. It is designed to alert law enforcement about potentially illegal activity involving money laundering or other illegal activity. The Financial Crimes Enforcement Network (FinCEN) is the bureau of the Treasury Department that implements the law by collecting information and writing rules. FinCEN issued a final rule at 31 CFR 1029.210 to require loan and finance companies to comply with the rules implementing the BSA. The rule became effective April 16, 2012, with mandatory compliance by August 13, 2012.

BSA Basics – Banks file currency transaction reports (CTR) on cash transactions of $10,000 or more. If you do not handle cash, then your AML plan does not need to cover this part.

Who does the AML program apply to?

The Rule covers large national lenders to one-man shops. No exceptions. The rule covers everyone originating mortgage loans.

How do you implement a program?

AML Program minimum requirements:

  • Designation and Naming of a Compliance Officer
  • Establishing policies and procedures for preventing and collecting reportable information, identifying reportable events and suspicious activity reports (SAR)
  • Establish employee training program
    • On boarding training – explain your policies and procedures and red flags
    • Annual training
  • Independent testing – does not need to be annual but must be based on size and complexity of the financial institution (mortgage broker business)
    • Large Companies may have their own, smaller institutions and may need to contract with an outside tester for this service

What is a SAR and what is reported?

  • A Suspicious Activity Report is an on-line form that is completed by the Compliance Officer
  • Must report transactions that are conducted or attempted through the finance company involving $5,000 or more. Suspicious activity is the trigger, application may be at any stage of the process, and transactions are reportable regardless of whether currency is involved.
  • Staff should be comfortable bringing up suspicions to the Compliance Officer
  • SARS are highly confidential! Never disclose a SAR was filed or any content in SAR
  • A SAR must be filed within 30 days of the initial detection

FinCEN has great information on their website.

Additional Information