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RMLO Final Rule

RMLO Final Rule

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Published by corruptioncurrents

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Published by: corruptioncurrents on Feb 07, 2012
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11/21/2013

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(BILLING CODE 4802-10)DEPARTMENT OF THE TREASURY31 CFR Parts 1010 and 1029RIN: 1506-AB02
Financial Crimes Enforcement Network: Anti-Money Laundering Program andSuspicious Activity Report Filing Requirements for Residential Mortgage Lenders andOriginators
AGENCY
: Financial Crimes Enforcement Network (“FinCEN”), Treasury.
ACTION
: Final Rule.
SUMMARY
: FinCEN, a bureau of the Department of the Treasury (“Treasury”), isissuing this Final Rule defining non-bank residential mortgage lenders and originators asloan or finance companies for the purpose of requiring them to establish anti-moneylaundering programs and report suspicious activities under the Bank Secrecy Act.
DATES
:
 Effective Date
: This rule is effective [INSERT DATE 60 DAYS AFTERPUBLICATION IN THE FEDERAL REGISTER].
Compliance Date
: The compliance date for 31 CFR 1029.210 is [INSERT DATE 180DAYS AFTER PUBLICATION IN THE FEDERAL REGISTER].
FOR FURTHER INFORMATION CONTACT
: FinCEN, Regulatory Policy andPrograms Division at (800) 949–2732 and select Option 1.
 
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SUPPLEMENTARY INFORMATION
:
I.
 
Statutory and Regulatory Background
The Bank Secrecy Act (“BSA”)
1
authorizes the Secretary of the Treasury (the“Secretary”) to issue regulations requiring financial institutions to keep records and filereports that the Secretary determines “have a high degree of usefulness in criminal, tax,or regulatory investigations or proceedings, or in the conduct of intelligence orcounterintelligence activities, including analysis, to protect against internationalterrorism.”
2
In addition, the Secretary is authorized to impose anti-money laundering(“AML”) program requirements on financial institutions.
3
The authority of the Secretaryto administer the BSA has been delegated to the Director of FinCEN.
4
Financial institutions are required to establish AML programs that include, at aminimum: (1) the development of internal policies, procedures, and controls; (2) thedesignation of a compliance officer; (3) an ongoing employee training program; and (4)an independent audit function to test programs. When prescribing minimum standardsfor AML programs, FinCEN must “consider the extent to which the requirementsimposed under [the AML program requirement] are commensurate with the size,
1
“Bank Secrecy Act” is the name that has come to be applied to the Currency and Foreign TransactionsReporting Act (Titles I and II of Pub. L. 91-508), its amendments, and the other statutes referring to thesubject matter of that Act. These statutes are codified at 12 U.S.C. § 1829b, 12 U.S.C. §§ 1951-1959, and31 U.S.C. §§ 5311-5314 and 5316-5332, and notes thereto.
2
31 U.S.C. § 5311.
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31 U.S.C. § 5318(h).
4
 
See
Treasury Order 180-01 (Sept. 26, 2002).
 
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location, and activities of the financial institutions to which such regulations apply.”
5
 The BSA also requires financial institutions to file suspicious activity reports (“SARs”).
6
The BSA defines the term “financial institution” to include, in part, a loan orfinance company. 
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The term “loan or finance company” is not defined in any FinCENregulation, and there is no legislative history on the term. The term, however, canreasonably be construed to extend to any business entity that makes loans to or financespurchases on behalf of consumers and businesses. Some loan and finance companiesextend personal loans and loans secured by real estate mortgages and deeds of trust,including home equity loans. Non-bank residential mortgage lenders and originators(“RMLOs” -- generally known as “mortgage companies” and “mortgage brokers” in theresidential mortgage business sector) are a significant subset of the “loan or financecompany” category, in terms of the number of businesses and the aggregate volume andvalue of transactions they facilitate.
8
In 2002, FinCEN issued a regulation that temporarily exempted loan and financecompanies and other categories of BSA-defined financial institutions from the obligation
5
Pub. L. 107–56 § 352(c), 115 Stat. § 322,
codified at 
31 U.S.C. § 5318 note. Pub. L. 107–56 is the Unitingand Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct TerrorismAct of 2001 (“USA PATRIOT Act”).
6
 
31 U.S.C.
§
5318(g). Section 5318(g) gives the Secretary authority to require financial institutions to fileSARs. This section was added to the BSA by section 1517 of the Annunzio-Wylie Anti-MoneyLaundering Act, Title XV of the Housing and Community Development Act of 1992, Pub. L. 102–550; itwas expanded by section 403 of the Money Laundering Suppression Act of 1994, Title IV of the RiegleCommunity Development and Regulatory Improvement Act of 1994, Pub. L. 103–325, to requiredesignation of a single government recipient for reports of suspicious transactions.
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31 U.S.C. § 5312(a)(2)(P).
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Loan and finance companies also supply short- and intermediate-term credit for such purposes as thepurchase of equipment, accounts receivable portfolios and motor vehicles, and the financing of inventories.In addition, specialized wholesale loan and finance companies provide liquidity that allows retail loan andfinance companies, as well as banks and others, to service end users.

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