The Financial Crimes Enforcement Network (“FinCEN”) issued guidance [FIN-2009-A001] to financial institutions on filing suspicious activity reports (“SARs”) regarding loan modification and foreclosure rescue scams. The FinCEN guidance noted an increasing amount of fraud relating to loan modification and foreclosure rescue scams and stated that unscrupulous persons and companies are targeting homeowners having difficulty in paying their mortgages. FinCEN also stated that the Home Affordable Refinance Program and the Home Affordable Modification Program, recently outlined by Treasury Secretary Timothy Geithner, may present an opportunity for abuse by unscrupulous persons or companies.
FinCEN noted that financial institutions may interact with loan modification and foreclosure rescue scams in two ways. First, persons or entities perpetrating scams may use the services of a financial institution to receive, deposit or transfer funds related to such scams. In this context, FinCEN reminded financial institutions that they should maintain risk-based anti-money laundering policies, procedures and processes to avoid misuse and to aid in the identification of potentially suspicious transactions. Second, financial institutions may interact with customers who are victims of loan modification or foreclosure rescue scams.
FinCEN provided a list of “red flags” to help financial institutions identify loan modification and foreclosure rescue scams. The red flags include, among others, a homeowner stating that he or she has been making payments to a party other than the mortgage holder or servicer, that he or she has hired a third party to help avoid foreclosure or help renegotiate the terms of his or her mortgage and that a third party used aggressive tactics to seek out the homeowner, that he or she paid someone to assist in obtaining help from the correct federal affordable housing program, or that he or she has been advised that there is no need to pay a mortgage because the contract is invalid.
FinCEN asked financial institutions that become aware of fraudulent activities related to loan modification or financial rescue scams to include the term “foreclosure rescue scam” in the narrative portions of all relevant SARs filed. FinCEN also requested that financial institutions include all information available for each party suspected of fraudulent activity when completing the Suspect/Subject Information Section of SARs. FinCEN clarified that the homeowner is often the victim of the scam and therefore should not be listed as a suspect, unless there is reason to believe the homeowner participated in fraudulent activity.