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Final Anti-Money Laundering Rule for Non-bank Lenders and Originators Released

February 13, 2012

February 13, 2012

On February 7, the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of the Treasury released a final rule that subjects nonbank residential mortgage lenders and originators to certain anti-money laundering (AML) regulations already applicable to other types of financial institutions. Importantly, FinCen has decided not to bring real estate agents and brokers under the rule, pending further study and analysis. Under the new regulations, nonbank lenders and originators will be required to establish anti-money laundering programs and file suspicious activity reports (SARs). This final rule follows a proposed rule issued in December 2010. FinCEN noted that this requirement will close a regulatory gap, as well as mitigate some of the money laundering risks and vulnerabilities that have been exploited in the nonbank residential mortgage sector.

In its official comment letter in February of 2011, NAR supported “continued efforts to combat money laundering and the financing of terrorism.” At the same time NAR applauded FinCen’s decision to defer possible regulations for real estate agents and others involved in real estate settlement and closings until further research and analysis can be conducted on their business operations and vulnerabilities to money laundering. NAR cited the fact that in nearly all real estate transactions funds are actually transferred using services of several different regulated entities.

The Final Rule announced this week suggests that such research will occur and states that while the final rule maintains the deferral of coverage for real estate agents, the rule is written in such a way that other groups could be added if the research indicates a need and as a result NAR will continue to closely monitor this issue.