1.The Role of FinCEN and Ongoing Scrutiny

FinCEN’s aggressive enforcement efforts extend beyond large institutions like TD Bank, affecting all financial institutions, including mortgage brokers. Both federal and state regulators are increasing their focus on BSA/AML compliance, with state regulators playing an increasingly important role in ensuring that financial institutions meet regulatory standards. State agencies may conduct their own examinations, impose additional compliance requirements, and issue penalties for non-compliance, even beyond what federal agencies mandate. Mortgage brokers must be proactive in maintaining robust compliance programs that address both federal and state regulations. Failing to do so can lead to significant fines, reputational damage, and prolonged oversight from regulatory authorities at both levels.

2.What Mortgage Brokers Can Learn

Mortgage brokers should take this situation as a warning and ensure they are fully compliant with BSA/AML regulations. It’s not just about following the letter of the law—it’s about implementing a comprehensive and effective compliance culture within your organization. This includes:

2.1Internal Controls

Mortgage brokers must implement clear, written policies and procedures to ensure compliance with BSA/AML regulations. Brokers should establish systems to monitor key aspects of the mortgage transaction for suspicious activity. This includes reviewing discrepancies in income, assets, and bank statements, as well as evaluating the authenticity of borrower documents such as tax returns, employment verification, and proof of down payments. Additionally, brokers should scrutinize the type of property being financed and assess whether the borrower’s employment and financial background align with the loan being applied for. Identifying red flags such as inconsistent or incomplete documentation is critical in detecting potential fraud or money laundering. Proper documentation and recordkeeping are essential to maintaining transparency and compliance, including retaining loan applications, borrower identities, financial records, and any supporting documents. The BSA Compliance Officer is responsible for overseeing these controls, ensuring that all policies, monitoring systems, and recordkeeping practices comply with BSA/AML regulations.

2.2Customer Due Diligence ("CDD")

Mortgage brokers are responsible for collecting and verifying key borrower information to assess the risk associated with each individual. This includes essential details such as the borrower’s name, address, date of birth, and social security number. Brokers should also conduct continuous monitoring of borrower relationships to identify any changes in behavior or financial activity that could indicate potential money laundering or terrorism financing. A risk-based approach should be applied, evaluating each borrower’s risk profile and adjusting monitoring efforts accordingly to identify higher-risk borrowers for closer scrutiny. The BSA Compliance Officer ensures that all Know Your Customer (“KYC“) and due diligence procedures are properly followed, with ongoing monitoring and risk assessments aligned with regulatory standards.

2.3Suspicious Activity Reporting

Mortgage brokers are required to file Suspicious Activity Reports with FinCEN if they detect activities that raise concerns, such as unusual loan transactions or financial patterns that may suggest money laundering, fraud, or terrorism financing. SARs must be filed within 30 days of identifying suspicious activity, with up to a 60-day extension allowed for further investigation. The BSA Compliance Officer is responsible for ensuring that SARs are submitted on time, with all necessary documentation and evidence gathered to justify the filing, while maintaining thorough records throughout the process.

2.4Independent Testing

An independent third-party audit or review of the mortgage broker’s BSA/AML compliance program is essential to evaluate its effectiveness, identify weaknesses, and ensure compliance with all applicable laws. This process confirms that the BSA Compliance Officer and relevant personnel have properly implemented the compliance program and that all controls are functioning as intended. The BSA Compliance Officer oversees the audit process, ensuring that any gaps or weaknesses identified are promptly addressed, and corrective actions are taken to strengthen the compliance program.

2.5Training and Awareness

It is important that all employees, including loan officers and support staff, receive regular, comprehensive training on BSA/AML requirements, red flags for suspicious activities, and the broker’s internal procedures for compliance. The training program must be up-to-date and adaptable to address evolving regulations and emerging risks in the financial landscape. Ongoing education ensures that employees remain aware of their responsibilities and regulatory obligations. The BSA Compliance Officer is responsible for ensuring that the training program is effective, current, and tailored to both the latest regulatory requirements and the institution’s specific risk profile.

3.Conclusion

At EASE Compliance Advisors, we understand the complexities of BSA/AML compliance and the potential risks facing mortgage brokers. We have Certified Anti-Money Laundering Experts and attorneys specializing in BSA/AML audits who can help ensure your program is robust and compliant with all regulatory requirements. If you need assistance with reviewing or strengthening your compliance program, contact us today.