I. INTRODUCTION
The Financial Crimes Enforcement Network (FinCEN) has issued an advisory that provides financial institutions with guidance in identifying and reporting suspicious activity related to loan modification/foreclosure rescue scams. The advisory instructs banks to use the term “foreclosure rescue scam” within the SAR narrative when completing a Suspicious Activity Report (SAR) that involves a loan modification/foreclosure rescue scam. In addition, banks are instructed to complete the Suspect/Subject Information section of the SAR with as much information as is available for each party suspected of engaging in the fraudulent activity. Banks should not list the homeowner who is the victim of the scam as a suspect unless there is reason to believe that the homeowner was a knowing participant in the scam. Banks should list all available information in the narrative about the homeowner and his or her property to assist law enforcement in investigating potential crimes.
The advisory also provides a list of “red flags,” which may be indicative of the presence of a foreclosure rescue scam. Financial institutions should consider these red flags in context with other indicators and facts in order to determine if suspicious or unusual activity has occurred.
II. SUSPICIOUS ACTIVITY REPORTING
The activities of financial institutions may intersect with these loan modification/foreclosure rescue scams in two ways. First, persons or entities perpetrating loan modification/foreclosure rescue scams may seek the services of financial institutions for the purpose of receiving, depositing or moving funds relating to the scams. With respect to these circumstances, consistent with anti-money laundering obligations pursuant to 31 C.F.R. pt. 103, financial institutions are reminded of the requirement to implement appropriate risk-based policies, procedures, and processes, including conducting customer due diligence on a risk-assessed basis to avoid misuse and aid in the identification of potentially suspicious transactions.
Second, financial institutions may become aware of such scams through their interactions with customers who have become victims. With respect to these circumstances, FinCEN is providing below a list of potential indicators of loan modification/foreclosure rescue scams.
Consistent with the standard for reporting suspicious activity as provided for in 31 C.F.R. pt. 103, if a financial institution knows, suspects, or has reason to suspect that a transaction involves funds derived from illegal activity or that activities conducted or attempted by, at, or through the financial institution appear to be indicative of money laundering, terrorist financing, or other violation of law or regulation, the financial institution should then file a SAR. As noted in FinCEN’s SAR Narrative Guidance Package, financial institutions must provide complete and sufficient descriptions of known or suspected criminal violations or suspicious activity in the narrative sections of Suspicious Activity Reports. In order to assist law enforcement in its efforts to target this type of fraudulent activity, if financial institutions become aware of this type of activity, they should include the term “foreclosure rescue scam” in the narrative portions of all relevant Suspicious Activity Reports filed. It is further requested that the Suspect/Subject Information Section of the SAR include all information available for each party suspected of engaging in this fraudulent activity - including information such as individual or company name, address, phone number and any other identifying information.
In many circumstances, the homeowner is a victim of the scam and therefore should not be listed as a suspect unless there is reason to believe the homeowner knowingly participated in the fraudulent activity. When the homeowner is simply a victim of a scam, including all available information in the narrative portion of the SAR about the homeowner and his or her property will also assist law enforcement in investigating these potential crimes.
III. POTENTIAL INDICATORS OF LOAN MODIFICATION/FORECLOSURE RESCUE SCAMS
The following points contain examples of information received from a customer or otherwise that may indicate the presence of a foreclosure rescue scam. Please keep in mind this list of “red flags” identifies only possible signs of fraudulent activity and that legitimate companies, which may or may not be affiliated with a Federal program, provide foreclosure assistance. In many instances, legitimate counselors will contact a financial institution on behalf of a homeowner facing foreclosure. Although no one red flag may be definitive, it is important to view the existence of any one red flag in context with other indicators and facts. Additional information on foreclosure rescue scams, and mortgage fraud in general, may be found in the four mortgage fraud related strategic analytical reports produced by FinCEN and available at www.fincen.gov.
IV. ASSISTANCE FOR CONSUMERS
Financial institutions may wish to caution their customers to avoid any business or person that seeks to charge up-front fees for services related to the Administration’s new loan modification and refinancing programs. More information about the various plans available to homeowners is available at www.MakingHomeAffordable.gov or by contacting the Homeowner’s HOPE Hotline at 1-888-995-HOPE (1-888-995-4673). If a financial institution becomes aware of a customer’s unintentional involvement in a foreclosure rescue scam, the customer may be referred to the Federal Trade Commission website, www.ftc.gov. This site contains a publication designed to educate homeowners on mortgage foreclosure rescue scams and also offers contact information for those who may have already fallen victim to a scam. Financial institutions may also consider referring customers to state or local authorities.