Why does our Fuller Center covenant partner have to create an Anti-Money Laundering Program (AML)?
The Secretary of the Department of the Treasury has extended the requirement for AML programs to be established by mortgage originators and finance companies. The Federal Register/Vol 77, No30/ February 14, 2012 says:
The term “loan or finance company” is not defined in any FinCEN regulation, and there is no legislative history on the term. The term, however, can reasonably be construed and extended to any business entity that makes loans or finances purchases on behalf of consumers and businesses.
…FinCen also expects non-profit housing organizations may reasonably be deemed to be extending a residential mortgage loan (including a short-term mortgage loan) or offering or negotiating the terms of a residential mortgage loan…
This applies to all Fuller Center covenant partners who signed the Fuller Center Covenant Partnership Agreement regardless of size and staffing level.
When is our Fuller Center covenant partner required by law to implement an AML program?
The compliance date for 31 CFR 1029.210 is August 13, 2012.
What are the penalties for not being in compliance?
This program is part of the PATRIOT Act and the penalties associated with noncompliance are severe, including very stiff fines ($25,000 per day) and significant criminal penalties (imprisonment up to five years). The Internal Revenue Service and Consumer Financial Protection Bureau have the right to audit Fuller Center covenant partners for compliance.
What changes do we have to make in how we operate?
Simply stated, the basic changes for the covenant partner will be: (1) appoint an officer or employee to keep trained on the AML program procedures (2) verify the identity of the applicants (3) check the names of the applicants with the government terrorist watch list (4) retain applicant documentation for 5 years (5) receive training as necessary (6) have a system to have someone other than the compliance officer perform an audit to make sure the AML procedures are being followed.
The law requires at a minimum a four pillar approach to implementing AML policy:
In accordance with the Financial Crimes Enforcement Network (FinCEN)’s requirement that all nonbank mortgage lenders and originators implement an AML program effective compliance date August 13, 2012, all US Fuller Center covenant partner Boards of Directors are required to adopt a program policy, procedures and controls document.
The Fuller Center for Housing’s US Programs Department will provide its covenant partners ongoing training opportunities at the annual Covenant Partner Conference or through appropriate third party training services.
Training programs will include how to identify “red flags” and signs of money laundering, how to respond when a risk is identified, record retention requirements and other items as required by BSA.
FinCEN will be developing tools to help consistent compliance examination. They will recommend reviews to see that covenant partners are making an effort to verify applicant identity, have a record keeping and file retention policy and understand the procedures for filing a Suspicious Activity Report (SAR). Someone other than the appointed compliance officer will be required to perform the compliance examination review and report to the covenant partner Board Treasurer.
What is a Suspicious Activity Report (SAR)?
Fuller Center covenant partners must report suspicious activities related to transactions of at least $5,000 or involving funds derived from or intended to disguise illegal activity. Suspicious activity also includes businesses in which a partner family, vendor or subcontractor would not normally be expected to engage.
For example, if a Fuller Center partner family whose annual income is $19,450 attempts to repay their mortgage with $30,000 and cannot adequately explain where the funds came from; this would represent a Suspicious Activity.
AML-Anti-Money Laundering Program
BSA-The Bank Secrecy Act authorizes the Secretary of the Department of The Treasury 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. This act gives the Secretary the authority to impose anti-money laundering programs (AML) on financial institutions.
RMLO- Residential Mortgage Lenders and Originators
FinCEN- Financial Crimes Enforcement Network is part of the US Department of The Treasury
SAR-Suspicious Activity Report
SDN-Specifically Designated Nationals and Blocked Person List
Helpful hint: If you want to search for a specific topic in the Operations Manual, search for the word “manual” followed by a “+” sign and then a specific term. For example, if you want to know more about hammers, you would search for “manual+hammers”.