Anti-Money Laundering Program and Suspicious Activity Report Filing Requirements for Residential Mortgage Lenders and Originators

1 ‘‘Bank Secrecy Act’’ is the name that has come to be applied to the Currency and Foreign Transactions Reporting Act (Titles I and II of Pub.
L. 91–508), its amendments, and the other statutes
referring to the subject matter of that Act. These statutes are codified at 12 U.S.C. 1829b, 12 U.S.C. 1951–1959, and 31 U.S.C. 5311–5314 and 5316– 5332, and notes thereto. 2 31 U.S.C. 5311. 3 31 U.S.C. 5318(h). 4See Treasury Order 180–01 (Sept. 26, 2002). 5 31 U.S.C. 5318(h). 6Public Law 107–56 § 352(c), 115 Stat. § 322, codified at 31 U.S.C. 5318 note. Public Law 107– 56 is the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (‘‘USA PATRIOT Act’’). 7 31 U.S.C. 5312(a)(2)(P). 8See 31 CFR 103.170; 67 FR 21113 (Apr. 29, 2002), as amended at 67 FR 67549 (Nov. 6, 2002) and corrected at 67 FR 68935 (Nov. 14, 2002). 9See 31 CFR 103.120. 10 31 U.S.C. 5318(g) was added to the BSA by
section 1517 of the Annunzio-Wylie Anti-Money
Laundering Act, Title XV of the Housing and Community Development Act of 1992, Public Law 102–550; it was expanded by section 403 of the Money Laundering Suppression Act of 1994 (the Money Laundering Suppression Act), Title IV of the Riegle Community Development and Regulatory Improvement Act of 1994, Public Law 103–325, to require designation of a single government recipient for reports of suspicious transactions. comply with rigorous recordkeeping and real-time reporting regimes. [FR Doc. 2010–30884 Filed 12–8–10; 8:45 am] BILLING CODE 6351–01–P DEPARTMENT OF THE TREASURY 31 CFR Part 103 RIN 1506–AB02 Financial Crimes Enforcement Network: Anti-Money Laundering Program and Suspicious Activity Report Filing Requirements for Residential Mortgage Lenders and Originators AGENCY: Financial Crimes Enforcement Network (‘‘FinCEN’’), Treasury. ACTION: Notice of proposed rulemaking. SUMMARY: FinCEN, a bureau of the Department of the Treasury (‘‘Treasury’’), is issuing proposed rules defining non-bank residential mortgage lenders and originators as loan or finance companies for the purpose of requiring them to establish anti-money laundering programs and report suspicious activities under the Bank Secrecy Act. DATES: Written comments on this notice of proposed rulemaking (‘‘NPRM’’) must be submitted on or before February 7, 2011. ADDRESSES:
FinCEN: You may submit comments, identified by Regulatory Identification Number (RIN) 1506–AB02, by any of the following methods:

• Federal E-rulemaking Portal:
  http://www.regulations.gov. Follow the instructions for submitting comments. Include 1506–AB02 in the submission. Refer to Docket Number FINCEN–2010– 0001.
• Mail: FinCEN, P.O. Box 39, Vienna,
  VA 22183. Include 1506–AB02 in the body of the text. Please submit comments by one method only. Comments submitted in response to this NPRM will become a matter of public record. Therefore, you should submit only information that you wish to make publicly available. Inspection of comments: Public comments received electronically or through the U.S. Postal Service sent in response to a notice and request for comment will be made available for public review as soon as possible on http://www.regulations.gov. Comments received may be physically inspected in the FinCEN reading room located in Vienna, Virginia. Reading room appointments are available weekdays (excluding holidays) between 10 a.m. and 3 p.m., by calling the Disclosure Officer at (703) 905–5034 (not a toll-free call). FOR FURTHER INFORMATION CONTACT: The FinCEN regulatory helpline at (800) 949–2732 and select Option 6. SUPPLEMENTARY INFORMATION:
  I. Background
  The Bank Secrecy Act (‘‘BSA’’) 1 authorizes the Secretary of the Treasury (the ‘‘Secretary’’) to issue regulations requiring financial institutions to keep records and file reports that the Secretary determines ‘‘have a high degree of usefulness in criminal, tax, or regulatory investigations or proceedings, or in the conduct of intelligence or counterintelligence activities, including analysis, to protect against international terrorism.’’ 2 In addition, the Secretary is authorized to impose anti-money laundering program requirements on financial institutions.3 The authority of the Secretary to administer the BSA has been delegated to the Director of FinCEN.4 A. Anti-Money Laundering Programs Financial institutions are required to establish anti-money laundering (‘‘AML’’) programs that include, at a minimum: (1) The development of internal policies, procedures, and controls; (2) the designation of a compliance officer; (3) an ongoing employee training program; and (4) an independent audit function to test programs.5 When prescribing minimum standards for AML programs, FinCEN must ‘‘consider the extent to which the requirements imposed under [the AML program requirement] are commensurate with the size, location, and activities of the financial institutions to which such regulations apply.’’ 6 The BSA defines the term ‘‘financial institution’’ to include, in part, ‘‘a loan or finance company.’’ 7 On April 29, 2002, and again on November 6, 2002, FinCEN temporarily exempted this category of financial institution, among others, from the requirement to establish an AML program.8 The purpose of the temporary exemption was to enable Treasury and FinCEN to study the exempted categories of institutions and to consider the extent to which AML requirements should be applied to them, taking into account their specific characteristics and money laundering vulnerabilities. The statutory mandate that all financial institutions establish an anti￾money laundering program is a key element in the national effort to prevent and detect money laundering and the financing of terrorism. This NPRM proposes to apply the AML program requirement to companies performing specified services in connection with residential mortgages. This would put these institutions on par with depository institutions performing such services in this respect.9 B. Suspicious Activity Reporting Programs With the enactment of 31 U.S.C. 5318(g) in 1992,10 Congress authorized the Secretary to require financial institutions to report suspicious transactions. As amended by the USA PATRIOT Act, subsection (g)(1) states:
  The Secretary may require any financial institution, and any director, officer, employee, or agent of any financial institution, to report any suspicious transaction relevant to a possible violation of law or regulation. There has been a regulatory gap between the BSA’s coverage of depository institutions and residential mortgage lenders and originators in that the latter are currently not subject to BSA requirements, the Suspicious Activity Report (‘‘SAR’’) foremost among them. Imposing a SAR requirement would address this regulatory gap. Moreover, a SAR requirement would potentially expand the kinds of activities being reported to FinCEN’s BSA database, thereby giving our regulatory and law enforcement partners a more complete picture, both on a systemic and case-specific level, of erowe on DSK5CLS3C1PROD with PROPOSALS-1