Lesson One – What is Anti-Money Laundering Training?

You may be wondering why you are taking Anti-Money Laundering Training and what it means.

What is Anti-Money Laundering?

Anti-Money Laundering (AML) refers to a set of procedures, laws or regulations designed to stop the practice of generating income through illegal actions. The goal of Anti-Money Laundering Training is to provide employees with guidelines for detecting fraud and money laundering and for knowing the process that must be followed when something fraudulent is suspected with a loan file, borrower or applicant.

Typically, money launderers hide their actions through a series of steps that make it look like the money that came from illegal or unethical sources was earned legitimately. To help prevent money laundering, the Treasury Department requires non-bank mortgage companies to maintain anti-money laundering programs.

It started with the Bank Secrecy Act.

Congress passed the Bank Secrecy Act (BSA) in 1970. It was the first law of its kind that was passed to fight money laundering in the United States. The BSA requires businesses to keep records and file reports that are determined to have a high degree of usefulness in detecting criminal, tax and regulatory matters. The documents filed by businesses under the BSA requirements are heavily used by law enforcement agencies, both domestic and international, to identify, detect and deter money laundering. This information can also help law enforcement end the furtherance of a criminal enterprise, terrorism, tax evasion or other unlawful activity.

The BSA requires financial institutions in the United States to assist U.S. government agencies charged to detect and prevent money laundering. Specifically, the act requires financial institutions to keep records of cash purchases of negotiable instruments, file reports of cash purchases of these negotiable instruments of more than $10,000 (daily aggregate amount), and report suspicious activity that might signify money laundering, tax evasion or other criminal activities.

Until 2012, non-bank mortgage companies were not required to follow the BSA. However, in August 2012, non-bank mortgage companies were included in the BSA, and thus are required to have an AML program.

Why Does It Matter to Lenders?

The United States Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued final regulations imposing all non-bank residential mortgage lenders and originators to have in place an AML program to meet the requirements of the BSA. The regulation requires all non-bank mortgage companies to have an AML program and to comply with filing of Suspicious Activity Reports.

The regulation applies to all non-bank mortgage lenders and brokers, regardless of their form of organization, number of employees, or the dollar amount or volume of transactions they conduct.

What is an Anti-Money Laundering Program?

Implementation of the AML requirements include:

  • Adoption of risk-based written policies, procedures and internal controls
  • Designation of a responsible AML Compliance Officer
  • Provision of ongoing staff training regarding AML program requirements
  • Obtaining specific information in connection with each transaction
  • Recordkeeping
  • Provision of periodic independent testing to monitor and maintain an adequate AML program

The next lesson will cover the elements of an effective AML program, including policies, procedures and what you must do to help detect fraud and money laundering.

First lets review some key terms and definitions:

FinCEN – Financial Crimes Enforcement Network

FinCEN is a bureau of the U.S. Department of the Treasury. FinCEN’s mission is to safeguard the financial system from illicit use, combat money laundering, and promote national security through the collection, analysis and dissemination of financial intelligence and strategic use of financial authorities.

BSA – Bank Secrecy Act

The Bank Secrecy Act establishes program, recordkeeping and reporting requirements for non-banks, national banks, federal savings associations, federal branches and agencies of foreign banks.

SAR – Suspicious Activity Report

A Suspicious Activity Report (SAR) is a report made by a financial institution about suspicious or potentially suspicious fraudulent activity. All employees have the responsibility to identify transactions that may be suspicious and report them to a designated person: the AML Compliance Officer. An AML Compliance Officer is responsible for determining if a SAR should be reported. The financial institution is not allowed to inform the client or the parties to the transaction that a SAR has been filed.

In the U.S., SARs must be reported to the Financial Crimes Enforcement Network (FinCEN).