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DOJ Announces Results of Year-Long Mortgage Fraud Initiative
On October 9, the DOJ, HUD, the FTC, and the FBI announced the results of the Distressed Homeowner Initiative, a year-long national effort to coordinate federal and state investigation and prosecution of alleged mortgage fraudsters. The Initiative was carried out under the Mortgage Fraud Working Group of the FFETF. Between October 1, 2011 and September 30, 2012, the unit’s work resulted in 285 criminal indictments and informations against 530 defendants. The announcement described many of the Working Group’s investigative tactics, including undercover operations, and explained the reasons behind the Working Group’s focus on Southern California. The Working Group expects more enforcement actions to result from ongoing investigations, and the FFETF has several other active working groups, including the Residential Mortgage-Backed Securities Working Group that recently sued a major bank over alleged fraudulent misrepresentations and omissions in the sale of RMBS to investors.
FinCEN Publishes Mortgage Fraud Update and SAR Activity Review, Updates Electronic Filing Specifications
This week FinCEN published a new SAR Activity Review and a Mortgage Loan Fraud Update. This issue of the semiannual SAR Activity Review provides (i) the results of a survey of readers of the Trends, Tips & Issues and By the Numbers publications, (ii) an article on foreign-located money services businesses that have registered with FinCEN, (iii) feedback on FinCEN data from state and local law enforcement agencies, and (iv) articles focused on changes to SAR reports and tips for writing more effective narratives. The SAR Activity Review also provides an industry perspective on the AML risks presented by business funded prepaid cards. In the Mortgage Loan Fraud Update, FinCEN provides data regarding recent mortgage SAR activity during the second quarter of 2012. Overall, FinCEN experienced a 41% decrease in mortgage fraud SARs over the previous year, but SARs regarding foreclosure rescue scams continued to grow. FinCEN believes the growth in foreclosure-related filings could be attributed to a growing awareness of such scams and real estate market conditions.
On October 10, FinCEN issued updates to its electronic filing requirements for Currency Transaction Reports, Suspicious Activity Reports, and Designation of Exempt Person Forms. The updates do not include any new or deleted fields but do provide clarifications in the instructions for certain fields and other technical changes.
California Enacts Remaining Parts of Homeowner Bill of Rights
On September 25, California Governor Jerry Brown signed the three outstanding bills proposed as part of the state’s Homeowner Bill of Rights. First, under Assembly Bill 2610, purchasers of foreclosed properties must provide ninety days’ written notice to quit before removing the tenant or subtenant from the property. Except in limited circumstances, tenants or subtenants holding possession of a rental housing unit under a fixed-term residential lease entered into before the purchase at foreclosure is permitted would have the right to possession until the end of the lease term. Second, Senate Bill 1474 allows the state attorney general to use a statewide grand jury to investigate and indict the perpetrators of financial crimes involving victims in multiple counties. Finally, Assembly Bill 1950 extends the statute of limitations for prosecuting mortgage related crimes from one year to three years.
FinCEN Repeals Special Requirements Regarding Two Burmese Banks
On September 26, the U.S. Department of Treasury announced that FinCEN is repealing a 2004 rule that required certain U.S. financial institutions to terminate correspondent or payable-through accounts for, or on behalf of, two Burmese banks, and to apply due diligence to guard against the banks’ indirect use of correspondent or payable-through accounts. The repeal takes effect upon publication in the Federal Register.
FinCEN Publishes Form for Electronic Reporting of Cash Payments
On September 19, FinCEN announced the availability of electronic reporting of cash payments. Under the Bank Secrecy Act any person engaged in a trade or business that, in the course of that trade or business, receives more than $10,000 in cash in one transaction or in two or more related transactions is required to report such transactions. FinCEN encourages covered persons to begin using the new electronic Form 8300 to report cash payments. FinCEN will continue to accept paper filings of Form 8300 for the near future, but eventually will require electronic filing of all reports.
FinCEN Plans Roundtable on Customer Due Diligence Proposal, Releases Materials from July Hearing
On September 17, FinCEN announced that it will host a roundtable discussion on its proposed customer due diligence requirements on September 28, 2012 in Chicago, Illinois. The announcement identifies a series of “key issues” on which the roundtable discussion will focus, including (i) how institutions currently identify, collect, and verify beneficial ownership information, (ii) the costs associated with collecting and verifying such information, and (iii) how institutions currently conduct due diligence on trust accounts. Last week, FinCEN released a summary of a public hearing held in July on its customer due diligence proposal. The summary provides the final agenda for the hearing, a general summary of topics covered, and statements and other materials submitted for the record.
U.S. FCPA Guidance Expected Soon
The DOJ is expected to release soon guidance on compliance with the FCPA, which originally was promised in November 2011 by Assistant Attorney General for the Criminal Division Lanny Breuer. Recent FCPA settlements obtained by the DOJ set the stage for the guidance and provide companies with insight as to what the guidance likely will include. For example, as part of its recent $60 million FCPA settlement, Pfizer agreed to a detailed series of FCPA-specific compliance undertakings, augmenting the more general rendition of program elements. The Pfizer deferred prosecution agreement (i) details the structure of the company’s compliance program staffing and oversight, (ii) mandates the maintenance and content of certain anti-corruption policies and procedures, (iii) provides mechanisms and resources for internal compliance reporting, (iv) requires annual company-wide, corruption-related risk assessments and five market-specific proactive compliance reviews annually, (v) requires thorough corruption-risk diligence prior to acquisitions, (vi) describes a program of third-party diligence and control, and (vii) directs a program of biennial training for specific personnel and directors, and a three-year training rotation for certain third parties. The BuckleySandler FCPA Team has prepared a Client Update and a checklist of the entire list of “Enhanced Compliance Obligations”, allowing compliance counsel to conduct a quick cross-check of their company’s existing compliance program elements.
FinCEN Launches New Data Portal for Law Enforcement Authorities
On September 10, FinCEN announced that its new search application providing access to data collected and maintained by FinCEN is now available for use by authorized users from other state and federal law enforcement and regulatory authorities. FinCEN has completed a series of meetings with other law enforcement officials to introduce them to FinCEN Query, a tool that will allow those authorities to access and analyze eleven years of data collected by FinCEN through its enforcement of the Bank Secrecy Act. The new tool replaces the existing database with updated technology to provide more complex search and analysis capabilities.
New FinCEN Director Announced
On August 20, the U.S. Department of Treasury announced that next month Jennifer Shasky Calvery will replace James Fries as the Director of FinCEN. Ms. Calvery joins FinCEN after a fifteen year career with the U.S. Department of Justice. Most recently she served as Chief of the Asset Forfeiture and Money Laundering Section.
FinCEN Issues Reminder Regarding New AML Compliance Obligations for Non-Bank Residential Mortgage Lenders and Originators
On August 13, FinCEN reminded non-bank residential mortgage lenders and originators (RMLOs) that their obligation to comply with new anti-money laundering (AML) regulations started this week. In February, FinCEN finalized a rule to extend to RMLOs certain AML regulations already applicable to other types of financial institutions, requiring non-bank RMLOs to establish AML compliance programs and file suspicious activity reports (SARs). The rule took effect April 16, 2012, but non-bank RMLOs had until August 13, 2012 to comply. This week’s announcement, as well as an advisory issued by FinCEN on August 16, remind covered companies that all FinCEN reports must be filed electronically and provide other compliance guidance. For additional information and compliance tips, please check out BuckleySandler’s three-part Spotlight Series on these new requirements for non-bank RMLOs.