SARs: More than a Report
DALLAS–Not only is cooperating with federal law agencies on mortgage fraud issues a good business practice-it’s also the law.
Mark Aldrich, principal with Aldrich, Bonnefin & Moore PLC, Irvine, Calif., noted that a final rule on Anti-Money Laundering Program and Suspicious Activity Report filing requirements for residential mortgage lenders and originators has been in effect since 2013.
“If you’re a lender, or an originator, or a broker or servicer, you are required to work with federal agencies not only in cases of mortgage fraud, but also for suspected mortgage fraud,” Aldrich said here at the Mortgage Bankers Association’s recent Risk Management, Quality Assurance and Fraud Prevention Forum.
FinCEN, the Financial Crime Enforcement Network, is looking to see that its subject financial institutions have in place programs to combat money laundering, Aldrich said. “They are looking to see that you have programs in place, and they will be checking to see that you do,” he said. “If they haven’t visited you yet, they will.
Special Agent Kevin Damuth of the Financial Institution Fraud Unit with the Federal Bureau of Investigation said in working with the FBI, the more information a lender can provide, the better.
“Try to be as accurate as possible when submitting SARs reports,” Damuth said. “Spell it out. We rely on your expertise and opinions, because at our SAR review meetings, we’re going through hundreds of reports.”
A single SAR might not put a person in jail, Damuth said, but it could be a piece of a larger puzzle. “A SAR is a ‘suspicious’ activity report,” he said. “A suspicion is a legitimate cause to submit a SAR.”
The FBI also has in place a Targeted SAR report, known as TSAR, to use Bank Secrecy Act guidelines for more complex and sophisticated schemes. More than 500 mortgage fraud cases per month and more than 700 bank fraud cases per month fall under the TSAR category.
“Not only are these generating leads, but they are also helping us build cases,” Damuth said. “SARs also represent intelligence; they provide us with leads; they help us develop new sources; and they provide support to other active cases.”
Ray Callahan, chief compliance officer with Prospect Mortgage, Sherman Oaks, Calif., said at his company, a SAR kills a loan. “If your loan produces a SAR, we don’t make the loan, plain and simple,” he said.
