Chapter 3 BSA/AML, US Patriot Act, & ECOA

Question 1

Bank Secrecy Act/Anti-Money Laundering (BSA/AML)

Answer 1

Created in 1970 to prevent money laundering.

Requires financial institutions to establish a compliance program and annual training to detect money laundering.
Program must include:
-Risk Assessment
-System of internal controls to ensure compliance
-Independent testing of compliance (every 12-18 months)
-The designation of an individual(s) responsible for managing BSA compliance
-Training for appropriate personnel.

Question 2

Suspicious Activity Reports (SARs)

Answer 2

Must be filed by your company with FinCEN no later than 30 calendar days after one of the following happens:

-Insider abuse involving any amount
-Transactions aggregating 5,00 or more where a suspect can be identified
-Transactions aggregating $25,000 or more, regardless of potential suspects
-Transactions aggregating $5,000 or more involving potential money laundering
-Transactions involving funds derived from illegal activities.

Question 3

How long must lenders retain copies of SARs?

Answer 3

5 years from the date of filing.

Question 4

US Patriot Act

Answer 4

Created in 2001 requiring identification to be provided for mortgage loans with the purpose of identifying terrorists.

Question 5

Customer Identification Programs

Answer 5

per the Patriot Act every financial institution must collect:
-Name
-Date of Birth
-ID number (US citizen SSN or tax payer number)
-For non-US citizens requires one of the following
-Taxpayer identification number
-Passport #
-Country of issuance
-Alien ID # or Any other government issued document showing nationality or residence with a photograph or similar safeguard.

Question 6

Patriot Act Disclosure Form

Answer 6

Filled out with 2 pieces of ID from the consumer. The form is kept in the loan file to show compliance with the patriot act.

Question 7

Equal Credit Opportunity Act (ECOA, Reg B)

Answer 7

Created in 1974 to prevent discrimination against specified protected classes by making credit equally available to all creditworthy customers regardless of rase, color, religion, natural origin, sex, or marital status.

Disclosures are; Notice of Adverse Action, Appraisal Notice, & ECOA Notice.

Question 8

Under ECOA you cannot ask about an applicant’s marital status except when the credit transaction is to be secured. If the application is for joint credit you can use the terms…

Answer 8

Married, Unmarried, and seperated

Question 9

Under ECOA a MLO cannot ask directly if an applicant is receiving alimony, child support, or separate maintenance payments.

How could you ask to find out?

Answer 9

It can be asked as part of a general statement about income. For example,

“Do you have any other income that you would like to claim such as interest, rent, investment, alimony or child support?”

You must make it clear to the borrower they are not required to tell us if they don’t want to but it may help them qualify as higher income for the loan.

Question 10

If child support is to be considered as income for the loan, how many years left are required?

Answer 10

To be considered as income for a loan you need to be receiving child support for the next 3 years.

Question 11

Is it required for the customer to disclose if they pay child support or alimony?

Answer 11

Yes. It is considered a liability.

Question 12

Age cannot be taken into consideration when accepting a loan except

Answer 12

If an applicant is under 18, if so they are not old enough to enter a binding contract.

Or, if the loan is for a Reverse mortgage or similar loan, for which you need to be at least 62 years old.

Question 13

Under ECOA it is the lender’s responsibility to notify an applicant of any action taken on the applicant’s request for credit within what time frame?

Answer 13

30 days

Question 14

Under ECOA can a notice of approval be implied or must it be expressly stated?

Answer 14

It can be expressly stated or implied.

Question 15

Under ECOA if the notice is adverse then an adverse action notice must be sent within 30 days with 2 exceptions.

Answer 15

1. The lender has 90 days to notify after making a counteroffer unless the applicant accepts or uses the credit during that time.
2. The lender may not have to notify the applicant of adverse action if the application was incomplete, and the lender sent the applicant notice that the application was incomplete.

Question 16

What must be included in the adverse action notice?

Answer 16

-Lender’s Name
-Lenders Address
-The nature of the action taken
-An ECOA notice that includes the federal agency responsible for enforcing compliance with ECOA
-Specific principal reasons for the action taken or disclose that the applicant has the right to request the reason for denial within 60 days of receiving the lender’s notification and who to contact.

Question 17

Under ECOA when must a lender provide an applicant with a copy of the appraisals and written valuations connected with the application?

Answer 17

Promptly upon completion or at least 3 business days before the consummation of the transaction, whichever is earlier.

Except, if the loan is granted an Appraisal Waiver from Fannie or Freddie, then the lender is required to inform the borrower that an appraisal is not required but they can have the option at their own cost.