July 9 2014

Reminder of AML Audit Deadline

Your Annual AML Audit Deadline is Just Around the Corner

If you initiated your AML plan in August, 2012 with everyone else who became subject to the FinCEN rule at that time, you were required to review your AML procedures annually.  Your audit would be due in August. We can assist you with your audit, or can point you to a company that can handle your needs if the numbers are too large to handle it internally.  

The Biggest Problem we are Seeing

Although the FinCEN guidelines suggest a strategy of annual audits and loan level audits, such as those conducted for quality control by most lenders, from the perspective of the initiative that spawned this requirement, the audits come too late to have any real benefit.  We have found that most mortgage brokers don't understand their role in this process.  "We haven't had any SARs!" comes the report at the audit. 

These words are spoken with pride, but the revelation of NO findings may actually be a trigger for a regulator to look MORE closely, and then discover that the only loans included in the sampling are those which have already passed underwriting muster.  In today's environment brokers and small lenders alike should take the approach that the government has assigned them the role of "watchdog."  Embrace it.  File a SAR today! It's your PATRIOTic duty!

NO SAR may actually trigger an audit.  If your production staff isn't identifying red flags, you can't report.

"Don't Worry - Be SAR-ry!"

As lenders and brokers we also experience the mixed message: "Keep your customer's information private at all costs."  This trust is the foundation of our business.  "If I report this information about my customer to the Federal authorities, am I not breaching that trust? Won't it come back to me through my referral sources?" These concerns have a reasonable basis, but understand this:
  • There is no direct line from the reporting activity to the investigation and prosecution.  In fact, if it is an isolated incident, it likely will not draw attention to the authorities given the number of enforcement priorities already occupying their attention.  
  • You are not allowed to disclose the fact that a SAR is in process.  
  • Your potential criminal and legal liability for being perceived as participating or assisting in perpetrating fraud is far greater if it turns out you did not report something that later gets revealed.
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