Mortgage loan officers and their companies are constantly required to be on the alert for possible money laundering schemes.
The Bank Secrecy Act delegated authority to the Director of the Financial Crimes Enforcement Network (FinCen). Effective August 13, 2012, FinCEN created regulations requiring non-bank mortgage lenders and originators to have written Anti Money Laundering policies in place and to begin filing suspicious activity reports (“SARs”).
Money laundering is the practice of filtering illegal gains, or “dirty” money, through a series of financial transactions in an effort to “clean” the funds. These ‘clean funds’ then appear to be proceeds from legal activities.
Money launderers seek to:
- Hide the origin and ownership of criminal funds
- Maintain control of the criminal proceeds during the laundering process
- Disguise and alter the form of the criminal funds, such as converting cash to loan disbursements
- “Clean” the criminal funds so that they can be used for legitimate purposes or for other criminal activities such as narcotics trafficking and terrorist financing
Money laundering and Terrorist financing
Terrorist financing is a crime in which the threat of violence is used to intimidate a particular population to do or to abstain from doing any specific act. Financial infrastructure is essential to terrorist operations. Because terrorist groups must be able to easily access their funds and keep those funds mobile to obtain necessary materials and manage logistics, money laundering is critical to their operations.
Terrorists use both unlawful and legitimate sources to finance their operations. Unlawful activities include kidnapping, narcotics trafficking, smuggling, fraud, robbery and identity theft. Legitimate sources include charities and payments from foreign government sponsors, business ownership, and member employment.
The following is outlined in the Anti-Money Laundering Examination Manual regarding money laundering and terrorist financing:
“Money laundering and terrorist financing are financial crimes with potentially devastating social and financial effects. From the profits of the narcotics trafficker to the assets looted from government coffers by dishonest foreign officials, criminal proceeds have the power to corrupt and ultimately destabilize communities or entire economies. Terrorist networks are able to facilitate their activities if they have financial means and access to the financial system. In both money laundering and terrorist financing, criminals can exploit loopholes and other weaknesses in the legitimate financial system to launder criminal proceeds, finance terrorism, or conduct other illegal activities, and, ultimately, hide the actual purpose of their activity.”