The Financial Crimes Enforcement Network said Wednesday that it plans to revisit anti-money-laundering rules for nonbanks.
The agency requested comment on a broad range of options for subjecting mortgage brokers and other companies to Bank Secrecy Act requirements, including whether they should file suspicious activity reports as banks do.
"There has been a 'regulatory gap' between the BSA's coverage of depository institutions and nonbank residential mortgage lenders," the agency said. "Fincen is concerned that this disparity in BSA regulatory coverage may have made nonbank residential mortgage lenders and originators more vulnerable to financial crime and money laundering than their bank counterparts."
The advance notice of proposed rulemaking follows a similar effort in 2003 that was abandoned over difficulties in defining its scope.
Now, as mortgage fraud has spiked and borrowers continue to go to nonbanks for credit, the agency said it was time to try again.
"As primary providers of mortgage finance who generally deal directly with consumers, these lenders and originators are in a unique position to assess and identify money-laundering risks and possible mortgage fraud while directly assisting consumers with their financial needs and protecting them from the abuses of financial crime," Fincen Director James Freis said.
The agency, which gave companies just 30 days to comment, suggested an "incremental" compliance process that would first establish BSA rules for nonbanks engaged solely in providing residential mortgages. The agency said it would then consider expanding the rules to cover commercial real estate lenders.
Fincen solicited comments specifically on how best to define which companies should be covered by the rule and which specific BSA requirements nonbanks should have to follow. In addition to SARs, the agency said it was considering requiring nonbanks to file currency transaction reports.
"Fincen anticipates that any SAR regulation proposal applicable to persons engaged in nonbank residential mortgage lending or origination would have similar reporting standards, thresholds and procedures as those set forth in SAR regulations for other industries," the agency's notice said.
Upon issuing the 2003 proposal, Fincen ran into complications defining which nonbank lenders — referred to as "persons involved in real estate closings and settlements" — would be covered by the rule.
In the notice issued Wednesday, Fincen said AML rules typically should focus on entities in the best position to identify and "prevent misuse of their services for money laundering and other financial crimes." The agency asked which nonbank lenders would meet that test.
"Fincen seeks comment on which participants involved in nonbank residential mortgage finance are in a position where they can effectively identify and guard against financial crime and money laundering in the transactions they conduct," the agency said.
Rob Rowe, senior counsel for financial institutions policy at the American Bankers Association, questioned why Fincen is requiring input within 30 days.
"That is a really short comment period," he said. "Do you want to race something through to have it done or do you want to think it through?"
