The latest report from the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) covering the period from March 2006 to March 2007 shows a 50 percent increase in suspicious activity reports (SARs) indicating possible mortgage fraud.
The previous study had examined a statistical sample of SARs reporting mortgage fraud filed between April 1996 and March 2006.
FinCEN’s analysis of the most recently studied time period indicates a 50 percent increase in the number of SARs intercepting suspected fraud prior to funding a mortgage.
FinCEN also noted a 44 percent increase in SARs reporting mortgage fraud in 2006.
Analysis of the more recent data indicates that many identified trends continued and certain suspicious activities showed marked increases.
For example, reports of identity theft in conjunction with mortgage fraud SARs increased 96 percent from the previous study. In 2006, there were 37,313 mortgage fraud SARs filed. The final total for mortgage fraud SARs filed in 2007 was 52,868, an increase of 42 percent.
Mortgage loan fraud was the third most prevalent type of suspicious activity reported, after Bank Secrecy Act/structuring/money laundering and check fraud.
According to FinCEN, this tremendous increase in SARs relating to possible mortgage fraud does not necessarily mean that mortgage fraud has increased, but rather “indicates growing vigilance and awareness in the financial community.”
“FinCEN’s analysis indicates that the financial community is becoming increasingly adept at spotting and reporting suspicious activities that may indicate mortgage fraud,” said FinCEN Director James H. Freis, Jr. “This exemplifies how compliance with Bank Secrecy Act regulations is consistent with a financial institution’s commercial concerns.”
The purpose of the Suspicious Activity Report (SAR) is to report known or suspected violations of law or suspicious activity observed by financial institutions subject to the regulations of the Bank Secrecy Act (BSA).
FinCEN requires a SAR report to be filed by a financial institution when the financial institution suspects insider abuse by an employee, violations of law aggregating over $5,000 or more where a subject can be identified, violations of law aggregating over $25,000 or more regardless of a potential subject, transactions aggregating $5,000 or more that involve potential money laundering or violations of the Bank Secrecy Act, computer intrusion, or when a financial institution knows that a customer is operating as an unlicensed money services business.
There has been a tremendous increase in the number of SARs in the wake of the 9/11 terrorist attacks, and banks have been extremely diligent in filing such reports.
Incidentally, it was through the use of SARs that former New York Governor Eliot Spitzer’s liasons with prostitutes were exposed. Spitzer was snared when the FBI intitiated a money laundering investigation based on SARs that his bank filed due to Spitzer’s suspicious financial transactions.