Compliance Blog

Written by Shari R. Pogach, Regulatory Paralegal

FinCEN recently issued Advisory FIN-2012-A009 highlighting mortgage loan fraud activity when credit unions are filing Suspicious Activity Reports (SARs).  A consolidation of information from previously issued agency reports, the advisory provides examples of common fraud schemes and potential “red flags” for mortgage loan fraud activity.

The advisory identifies and briefly describes nine types of mortgage loan fraud based upon descriptions from previously filed SARs or as identified by law enforcement including:  occupancy fraud, income fraud, appraisal fraud, employment fraud, liability fraud, debt elimination schemes, foreclosure rescue scams, social security number fraud and other identity theft, and home equity conversion mortgage. 

In addition, FinCEN offers examples of possible red flag indications of fraudulent schemes related to mortgage fraud.  However, the agency also cautions that these indicators should not be considered exhaustive nor should any single red flag be considered as definite proof of fraudulent activity.  In fact, many of the provided examples could apply to multiple fraud schemes.  FinCEN notes that a credit union must look at any red flag(s) in the context of other indicators and facts, and whether this might indicate the need for further due diligence or require a decision as to the filing of a SAR.

In completing a mortgage loan fraud activity SAR, credit unions should indicate the type of mortgage loan fraud by entering the appropriate code and providing a detailed description in the narrative.  For activity that does not have a corresponding code, credit unions should identify “Other” and describe the activity in the narrative.  And, where available, credit unions are requested to include in the SAR narrative portion, the Conference of State Bank Supervisors’ (CSBS) National Mortgage Licensing System and Registry (NMLS) assigned “NMLS Unique Identifier.”

All in all, FinCEN’s Advisory FIN-2012-A009 contains good Bank Secrecy Act (BSA) compliance guidance for credit union mortgage loan originators.