Question 27
Domain 1: Federal Mortgage-Related LawsUnder the Bank Secrecy Act and FinCEN's Anti-Money Laundering (AML) rules, residential mortgage lenders and originators must:
Correct answer: B
Explanation
Under FinCEN’s AML rules for residential mortgage lenders and originators, they are required to maintain an AML program and report suspicious transactions. The Bank Secrecy Act framework requires covered institutions to detect and report activity that “involves funds derived from illegal activity” or is designed to evade reporting requirements, which is done through SARs when warranted.
Why each option is right or wrong
A. File a Form 1099 with the IRS for any cash transaction over $5,000
B. Establish an AML program and file Suspicious Activity Reports (SARs) when warranted
31 C.F.R. § 1029.210 requires residential mortgage lenders and originators to implement a written AML program that includes internal controls, independent testing, a designated compliance officer, and ongoing training. In addition, 31 C.F.R. § 1029.320 requires them to file SARs for transactions involving at least $5,000 when they know, suspect, or have reason to suspect that the activity involves funds from illegal activity, is designed to evade BSA requirements, lacks a lawful purpose, or uses the institution to facilitate criminal conduct.
C. Verify all borrowers via in-person fingerprinting before each loan
D. Limit cash transactions to under $1,000 per loan