As we noted
month, the federal government is considering new corporate compliance
requirements to combat mortgage fraud. On July 15, 2009, the government took a
first step when the Financial Crimes Enforcement Network (FinCEN), a bureau of
the Treasury Department, issued a notice soliciting public comment on a proposal
to subject “non-bank residential mortgage lenders and originators” to anti-money
laundering (AML) compliance requirements.
Businesses subject to AML requirements must develop written compliance
programs that (1) establish policies, procedures, and controls designed to
ensure compliance with AML regulations; (2) designate a compliance officer with
responsibility for coordinating and monitoring the AML program; (3) provide
training for appropriate personnel; and (4) implement a plan for independent
review of the AML programs.
Many businesses subject to AML requirements must file Suspicious Activity
Reports (SARs), which notify law enforcement of suspicious transactions.
According to FinCEN, in recent years a significant percentage of SARs filed by
banks and other covered businesses have reported suspected mortgage fraud
Until now, FinCEN has exempted from AML requirements, including filing SARs,
the categories of “loan or finance company” and “persons involved in real estate
closings and settlements.” In light of the increasing concern among regulators,
law enforcement, and Congress over sales and financing practices in the mortgage
industry, FinCEN is contemplating an incremental approach to implementing AML
requirements for these categories.
By focusing on “non-bank residential mortgage lenders and originators” at the
outset, FinCEN is looking to regulate what it perceives to be the primary
providers of mortgage finance and those persons in unique positions to assess
and identify money laundering and fraud. Describing the current state of the law
as a “regulatory gap,” FinCEN is exploring the extent to which non-bank
residential mortgage lenders and originators should be subject to the same AML
requirements as banks that conduct the same type of business.
McGuireWoods’ government investigations group has experience in the defense
of fraud-related criminal investigations; the handling of internal
investigations into these types of matters; and the establishment, review and
revision of corporate compliance programs, including
anti-money laundering compliance and investigation matters.
For more information about McGuireWoods’ capabilities and resources in
connection with government investigations and compliance programs, please contact the
authors or any other McGuireWoods attorney.