The Bank Secrecy Act ("BSA") passed in 1970 was established to detect and prevent money laundering. Originally, these statutes were required for banks, credit unions and other depository institutions. Casinos, jewelers and stock brokers were added later.  Now the mortgage industry is required to be in compliance with the BSA.   

On February 14, 2012, the Financial Enforcement Network (FinCEN), a bureau of the Department of the Treasury,  issued a final rule for all non bank residential mortgage lenders and mortgage loan originators (the companies not the individuals) to be in compliance with certain BSA regulations by August 13, 2012.   So....are you READY?

Many questions are bound to develop in the coming months.  Below are a few frequently asked questions that may arise.

Who will oversee the BSA in regard to the mortgage industry?  

The Financial Crimes Enforcement Network (FinCEN) has been delegated to oversee the BSA in regard to the mortgage industry. 

Who will examine for BSA compliance? 

Examinations could be done by:

FinCEN

IRS

State Regulatory Agencies

Consumer Financial Protection Bureau (CFPB)

Federal Banking Agencies

Where can I find the new laws/statutes?

31 CFR 1010.100

31 CFR 1029

What is required?

Starting on August 13, 2012, all non bank residential mortgage lenders and mortgage loan originators (the  companies not the individuals) will be required to have in place a written Anti- Money Laundering Program or AML. This program should be designed to  prevent the licensee or its employees (including loan originators) from being used to facilitate money laundering, finance terrorist activities, mortgage fraud or other criminal activities.

The program must incorporate the following core actions:

• The program must develop policies, procedures and controls based on the licensees assessment of mortgage fraud, money laundering and terrorist financing risks associated with the licensee's products and services.

• The licensee must designate a Compliance Officer to ensure the proper implementation of the programs and ensure that the program is updated at needed.

• The Compliance Officer will also ensure that employees, agents and brokers receive on-going training, to maintain compliance with the BSA.

• The Compliance Officer will independently monitor the program to ensure it is adequate. This will include the retention of the SAR documentation for 5 years after filing.

What is an SAR?

The Suspicious Activity Report or SAR is a federal government form required to be completed within 30 days of the suspicious activity.   Any transaction which includes aggregate funds of $5,000 (or more) in cash or other assets requires the filing of a SAR. If a transaction is less than $5,000 and the licensee suspects the funds or assets were derived from illegal activity, a SAR should be filed.

The federal government as of July 1, 2012 will be accepting the SAR reports only thru an electronic filing system located at http://basefiling.fincen.treas.gov.

The SAR is confidential. The information gathered is only allowed to be shared with the agencies authorized to examine and federal, state and local authorities.  DO NOT SHARE WITH THE BORROWER OR THE PERSON NAMED AS SUSPECT.     

What are the penalties for non-compliance?

Civil Penalties will be assessed depending on whether the violation is deemed to be willful or negligent. The licensee could see any of the following or a combination of the following:

• Civil penalty assessed at $1,000 per day for each-day of non-compliance.

• Willful violations may result in civil penalties for the licensee or its employees, officers or owners in an amount of the transaction (up to $100,000) or $25,000, whichever is greater.

• Civil penalties of up to $500 may be imposed for negligent violations, if there is a pattern of negligence then a civil penalty of $50,000 could be assessed.

• Criminal Penalties could also be assessed, if warranted.

August 13, 2012 is just around the corner.

Are you ready?? 

The above summary is available for informational purposes only and not for the purpose of providing legal advice.  You should contact your attorney to obtain advice with respect to specific issues or questions.