RMLOs: Ensuring AML Compliance in Mortgages

The Bank Secrecy Act of 1970 (BSA) requires financial institutions to play a pivotal role in detecting and preventing money laundering activities. The Financial Crimes Enforcement Network (FinCEN) has been tasked with implementing and enforcing BSA compliance. In an effort to close potential regulatory gaps, on February 7, 2012, FinCEN extended the requirement for an Anti-Money Laundering (AML) Program to Ensuring AML Compliance in Mortgage Loan Originators (RMLOs). This extension aimed to leverage RMLOs' direct interaction with consumers to identify and assess money laundering fraud. In this blog post, we will delve into the key elements of an RMLO's AML Program, emphasizing the significance of compliance and outlining the necessary components.

Policies, Procedures, and Internal Controls:

An effective AML Program for RMLOs necessitates the development and implementation of comprehensive policies, procedures, and internal controls. These should be based on a thorough risk assessment of the company, taking into account products, services, geographical locations, and customer markets served. The Program must include policies to verify customer identities, identify suspicious activities through red flag indicators, and establish procedures for handling such incidents.

Designation of an AML Compliance Officer:

As an RMLO, it is crucial to appoint an AML Compliance Officer responsible for managing compliance within the company. In a one-man shop scenario, this role would typically fall to you. The AML Compliance Officer's duties include monitoring compliance with the AML Program, updating it as needed, and ensuring that all personnel receive adequate training on AML components.

Ongoing Training:

Regular training is vital to keep company personnel informed about BSA regulations, specific policies, procedures, and processes. All employees involved in any aspect of residential mortgage loan transactions should receive annual training. This training ensures that employees are aware of red flags, understand reporting procedures, and can effectively contribute to the resolution of any identified suspicious activity.

Independent Testing:

An integral part of an RMLO's AML Program is annual independent testing, often in the form of an audit. This testing verifies the effectiveness of the Program and can be conducted by a third-party or an internal auditor, excluding the AML Compliance Officer or any related personnel. The frequency of testing is risk-based, typically recommended every 12 to 18 months, aligned with the company's size, complexity, and risk profile. The findings of the AML audit help determine the appropriate frequency and focus of future testing.

1. Financial Crimes Enforcement Network (FinCEN): Website: https://www.fincen.gov/ FinCEN is a bureau of the U.S. Department of the Treasury responsible for safeguarding the financial system from illicit use and combating money laundering and other financial crimes. They provide guidance, regulations, and resources related to AML and BSA compliance.

2. Consumer Financial Protection Bureau (CFPB): Website: https://www.consumerfinance.gov/ CFPB is a U.S. government agency that regulates financial products and services, including mortgages. They may have resources and information related to AML compliance requirements for mortgage loan originators.

3. Office of the Comptroller of the Currency (OCC): Website: https://www.occ.gov/ OCC is a U.S. federal agency that supervises and regulates national banks and federal savings associations. They may have relevant guidance for AML compliance in the banking sector, which could include information related to mortgage loan originators.

4. Federal Deposit Insurance Corporation (FDIC): Website: https://www.fdic.gov/ FDIC is a U.S. government agency that provides deposit insurance to depositors in U.S. banks. They may have information on AML compliance requirements for banks, including those involved in mortgage lending.

5. National Credit Union Administration (NCUA): Website: https://www.ncua.gov/ NCUA is a U.S. government agency that supervises and regulates federal credit unions. They may have resources related to AML compliance for credit unions involved in mortgage lending.