New Money Laundering Rules

By Rian Bader

Proposed regulations have been issued by the U.S. Treasury Department's Financial Crimes Enforcement Network (FINCEN) that would require the establishment of antimony laundering and compliance programs with the Bank Secrecy Act (BSA) by nonbank home mortgage lenders and originators.

The proposed regulations extend the antimony laundering and suspicious activity requirements that have long been imposed on financial institutions to nonbank residential mortgage lenders and originators, now not covered by the rules. These requirements include, but are not limited to, the development of internal policies and controls, training, and the designation of a compliance officer. The proposed rules would not apply to banks, persons regulated by the SEC or Commodities Futures Trading Commission or any person employed by a financial institution.

The proposed regulations define a residential mortgage lender as an individual to whom the debt arising out of the residential mortgage is initially payable or to whom the debt is assigned to after settlement. Individuals financing the sale of their own property would not be considered a mortgage lender. A residential mortgage originator is an individual who negotiates the terms of mortgage for compensation. Mortgage loans are considered residential mortgage loans if they are secured by a one-to-four unit residential structure or real estate on which the construction is intended.

As concerns over the financing of terrorist activities and money laundering heighten, mortgage lenders and originators are going to be required to develop anti-money laundering programs within six months after the effective date of the final regulations or six months after a lender or originator becomes subject to the new rules. Compliance officers within the company would be responsible to oversee that such a program is implemented, employees are properly trained and the program is current. If the mortgage lenders and/or originators suspect that a transaction involves illegal activity or intends to evade BSA requirements, they would be responsible for filing a suspicious activity report with FINCEN. The reports are required for the most part to be filed within 30 calendar days after the company detects the suspicious activity.

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