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FinCEN report links mortgage fraud with other financial crime.

According to findings from a report released in March by the Financial Crimes Enforcement Network (FinCEN), Vienna, Virginia, suspected perpetrators of mortgage loan fraud could also be involved in other financial crimes, including check fraud, money laundering and stock manipulation.

FinCEN's study, Mortgage Loan Fraud Connections with Other Financial Crime, revealed the activities of people reported in depository institution suspicious activity reports (SARs) for mortgage fraud between July 2003 and June 2008 by evaluating three other types of SARs: those filed by money services businesses (SAR-MSB), by securities brokers and dealers or insurance companies (SAR-SF), and by casinos and card clubs (SAR-C).

From those SARs, FinCEN identified approximately 156,000 mortgage fraud subjects and found that 2,360 were reported for suspicious activity in 3,680 of the other SAR types.

"Criminal actors may attempt to exploit any vulnerability to commit fraud and launder money through a range of financial institutions," said FinCEN Director James H. Freis Jr. "The interconnected nature of suspicious activity across multiple financial sectors covered by FinCEN's Bank Secrecy Act regulations underscores the immense value of combining insights from the different sectors for the purpose of detecting and thwarting criminal activity."

FinCEN found that suspicious activities of mortgage-loan fraud subjects most often reported in the SAR types reviewed were money laundering and transactions apparently structured to avoid currency transaction-reporting requirements--accounting for 85 percent of SAR-MSBs, 47 percent of SAR-Cs and 28 percent of SAR-SFs.

The FinCEN study's other findings included:

* Approximately 70 percent of the examined SAR-MSBs described suspicious wire transfers, and 34 percent of those reports described transfers to foreign countries.

* In SAR-SFs, FinCEN found an unusually high number of reports of suspicious documents, fraudulent identifications (IDs) and forgery.

* Check fraud by mortgage-fraud subjects was reported in the SAR-Cs at an unusually high level--17 percent, compared with only 3 percent of all SAR-Cs during the same five-year period.

The FinCEN study follows the release of revised rules and new guidance by the agency intended to expand the ability of financial institutions to share their suspicious activity reports internally in keeping with the Bank Secrecy Act.

While the proposed rules and guidance focus on depository institutions, securities broker-dealers, mutual funds, futures commission merchants and commodities brokers, they could have broader implications for mortgage bankers as FinCEN is seeking comment on whether the guidance should be applied to other financial institutions subject to the anti-money-laundering SAR mandate.

The proposed rules and guidance would permit financial institutions to share a SAR, or information that would reveal the existence of the SAR, with an affiliate--provided that affiliate is subject to a SAR regulation issued by FinCEN or the federal banking agencies, Freis said.

Freis said that FinCEN will be conducting additional analyses throughout 2009 to examine the relationship between mortgage-loan fraud and other financial fraud, and it will further explore reported activities, locations and subjects.
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Title Annotation:Briefing Book; Bank Secrecy Act of 1970
Comment:FinCEN report links mortgage fraud with other financial crime.(Briefing Book)(Bank Secrecy Act of 1970)
Publication:Mortgage Banking
Geographic Code:1U5VA
Date:May 1, 2009
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