USA Patriot ACT

• Uniting and strengthening America by providing the appropriate tools required to intercept and obstruct terrorism act of 2001

• Title III

  • International money laundering abatement and anti-terrorist financing act of 2001

  • Directly impacts mortgage lending

• Regulated by the financial crimes enforcement network (FINCEN)

  • Part of the treasury deptartment

  • FBI also has authority to investigate terrorism

Purpose:

• Strengthen the money laundering control act of 1968

• added additional amendment to the bank secrecy act (BSA)

• Allowed congress to outline how money laundering and terrorism were connected by stating:

  • Money laundering provides the financial fuel that permits transactional, criminal enterprises to conduct and expand their operations to the detriment of the safety and security of Americans

  • Money laundering is the filtering of all ill-gotten gains through a series of transactions to prevent the tracing of funds to the original source

• federally regulated banking institutions:

  • Banks and credit unions

• Non-federally regulated private loans

• Foreign bank branches and/or agencies located in the US

• persons involved in real estate settlements and/or closing

• Loan and/or finance companies

  • Residential mortgage lenders

  • residential mortgage originator

  • collectively referred to as RMLOs under law

• Establishing a consumer Identification program (CIP)

  • Verification of the identity by collecting name, DOB, SSN, and/or taxpayer identification number (TIN), passport number, and/or alien identification number

  • referencing drivers license and/or passport to verify information is correct

  • maintaining verification records for 5 years

  • comparing identity of consumers against known and/or suspected terrorist list

• Terrorist watch list is compiled by the office of foreign assets control (OFAC)

• Creating on Anti-Money Laundering (AML) program

  • Must be in writing, approved by management, and reasonable designed to prevent the loan of finance company from being used to facilitate money laundering or the financing of terrorist activities.

  • Includes the appointment of a compliance officer, ongoing training for employees, and independent testing of the AML program

• making and filing of Suspicious Activity Reports (SAR) if there is evidence of illegal activities, funds have been derived of illegal activity, or evidence the consumer was trying to evade the BSA

  • Must be filed within 30 days of the suspicious activity

  • records must be retained for 5 years from filing date

• Receipt of currency (Cash deposits) in excess of $5000 must be reported on a SAR

• Prohibited practices:

  • Opening new accounts without verifying identity

  • advising a suspect that a SAR has been filed.

• BSA/AML

  • Bank secrecy act and Anti-money laundering laws

  • also known as the currency and foreign transaction reporting act of 1970

• Purpose:

  • Prevents the financial services industry in the united states from bring used to launder money

  • Help deflect money laundering through reporting and record keeping

• Requirements:

  • Implement Anti-money laundering (AML) policy

  • Minimum standards must include

    • Controls and metrics to ensure compliance

    • Independent auditing

    • Identifying individuals responsible for managing compliance

    • staff training

• Customer Identification program (CIP):

  • Verify customer identity

  • Maintain verification records for at least 5 years

  • cross-check customer identities with government lists for known and/or suspected terrorists (OFAC list)

  • Distribute CIP notices to customers

  • Cooperate with 3rd party institutions for CIP requirements

Reporting and records*

• Currency transaction report (CTR)

  • reported to the financial crimes enforcement network (FinCEN)

  • required for individual transactions exceeding $10,000 or structured transactions that total $10,000 or more

• Transactions between $3000 and $10,000 do not need to be reported, but financial institutions must make records of these transactions available to FINCEN upon request

• Record large wires:

  • $3000 or more must be recorded by the sending and receiving institution

• Suspicious activity report (SAR)

  • Filed as needed for suspicious activities

• Lenders must cooperate with all investigations and supply FINCEN with information on money laundering and suspicious activity upon request

• Goes further than the USA PATRIOT act

• Financial institutions are required to report any known and/or suspected criminal offenses involving transactions of $5000 or more or if they are a suspect of violating BSA/AML

  • includes insider trading

• Must be filed within 30 days of detection

  • E-filing is required unless institutions are unable to file online

• Financial institutions are prohibited from telling a customer that a SAR has been filed

• Must be retained with supporting info for 5 years

  SAR

  • Form 3

    • Part 1 - Subject information

    • part 2 - Suspicious activity information

    • part 3 - Information about the financial institution where the activity originated

    • part 4 - filing institution contact name

    • part 5 - Narrative