FinCEN Finalizes AML Regulations for Housing Government Sponsored Enterprises
by: Anna DeSimone
February 25, 2014 the Federal Register,Vol. 79, No. 37 published the Final Rule requiring that the Housing GSEs (Fannie Mae, Freddie Mac, and the 12 Federal Home Loan Banks) file Suspicious Activity Reports (SARs) directly with FinCEN instead of the current practice of filing less detailed reports through their regulator, the Federal Housing Finance Agency (FHFA).
The Financial Crimes Enforcement Network (FinCEN) finalized anti-money laundering (AML) regulations on February 20, 2014 that will require the housing government sponsored enterprises (Housing GSEs) to develop programs for the prevention of money laundering and to file suspicious activity reports (SARs) with FinCEN. This Final Rule adopts, without significant change, all of the regulatory provisions contained in FinCEN’s November 2011 Notice of Proposed Rulemaking. The final rule is expected to aid in the fight against mortgage fraud. This will provide law enforcement and regulators with a more complete and timely national picture of suspected mortgage fraud and money laundering, as well as assist with investigations and prosecutions of significant mortgage fraud schemes.
FinCEN closely coordinated this rulemaking with the FHFA, to which FinCEN is delegating responsibility for examining the Housing GSEs for compliance with the regulations. This rule is effective April 28, 2014. The compliance date for 31 CFR 1030.210 is August 25, 2014.
Federal Register Supplementary Information
The Housing GSEs are involved in providing financing to the residential mortgage market and thus are exposed to the risk of fraud. Although the business of the Banks differs in a number of respects from that of Fannie Mae and Freddie Mac, all of the Housing GSEs are involved in providing financing to the residential mortgage market and thus are vulnerable to fraud and other financial crimes. Also, both the primary and secondary residential mortgage markets are vulnerable to fraud and money laundering in terms of the proceeds of crime being invested in real property or securitized mortgages and related financial instruments.
By purchasing mortgage loans, extending loans secured by mortgages and other real estate related collateral, and engaging in a variety of related financial activities, the Housing GSEs have access to, and are in a unique position to provide, information on suspected mortgage fraud and money laundering that has proven valuable to law enforcement and regulators in the investigation and prosecution of mortgage fraud and other financial crimes. While current fraud reporting by the Housing GSEs has value in combating fraud, the establishment of AML and SAR programs by the Housing GSEs will enable them to support broader regulatory and law enforcement efforts to combat mortgage fraud and related financial crimes consistent with the purposes of the BSA.
About the Author
Anna DeSimone is President and Founder of Bankers Advisory, Inc. She can be reached at anna@bankersadvisory.com
Anna DeSimone founded Bankers Advisory in 1986 and is a nationally recognized authority in residential mortgage lending. She has received numerous industry awards and has authored more than 40 best practices guides and hundreds of articles.
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