PREPARED REMARKS OF JAMES H. FREIS, JR. DIRECTOR, FINANCIAL CRIMES ENFORCEMENT NETWORK U.S. DEPARTMENT OF THE TREASURY DELIVERED AT THE MORTGAGE BANKERS ASSOCIATION’S NATIONAL FRAUD ISSUES CONFERENCE 2012 PHOENIX, AZ APRIL 23, 2012 Good morning. I am pleased to be joining you again today. When I spoke with you last year, I focused my remarks on what FinCEN was trying to do to address a vulnerability in our Bank Secrecy Act/Anti-Money Laundering (BSA/AML) regime as it relates to mortgage brokers, and how this effort fits into FinCEN’s overall initiative to combat mortgage fraud at all levels.1 And in 2009, I discussed FinCEN’s broad efforts working with regulators and law enforcement to fight mortgage fraud, and one of the key things I hoped to do at that time was to raise awareness of the mortgage fraud studies that FinCEN already had been putting out for years, and the data that we continue to publish, to promote market integrity and help banks and other financial institutions protect themselves from fraud.2 In continuing to focus today on mortgage brokers, I want to focus on four key areas: How FinCEN is closing regulatory gaps, partnering with law enforcement, identifying trends, and engaging the industry. And I feel it is important to note at the outset, that our discussion today must be seen in the context of FinCEN’s overall efforts to combat a broad range of fraud and financial crimes that impacts our country and all of us Americans. As Attorney General Eric Holder noted in a recent speech: “[O]ver the last three years, the Justice Department – and a host of our federal, state, and local partners – have come together in an unprecedented national effort to combat and prevent a wide range of financial-fraud crimes. From securities, bank, and investment fraud; to mortgage, consumer, and health-care fraud – we’ve found that these schemes are as diverse as the imaginations of those who perpetrate them, and as sophisticated as modern technology will permit.” 3 I am proud to say that we at FinCEN have partnered with the Justice Department in a broad range of initiatives related to these issues. Specifically, you will hear during this conference some of these initiatives from the agencies and persons with whom FinCEN has worked closely. In fact, for more than 10 years, FinCEN has been analyzing trends and patterns related to mortgage fraud. Back in 2002, FinCEN’s analysts published findings that highlighted areas of potential concern in the sales and management of real estate.4 As we continued to follow the trends in suspicious activity reporting (SARs) from 2003 into 2004, FinCEN analysts noted a dramatic increase in the number of filings indicating suspected mortgage fraud, leading us to drill down more closely into this area. For our first detailed study focusing exclusively on mortgage fraud, published in November 2006,5 we proceeded to go back to take a closer look at all of the mortgage fraud filings since the inception of the SAR reporting requirements, analyzing 10 years of mortgage fraud reporting data nationwide, and we explained a range of fraudulent schemes in an effort to provide the financial industry with red flag indicators that could help them protect their financial institutions and their customers from being victims of fraud. FinCEN analysis continues to highlight the increase in SARs reporting mortgage fraud, as well as focusing on frauds in Home Equity Conversion Mortgages,6 and the relationship between mortgage fraud and other financial crimes. 7 FinCEN also has issued Quarterly Reports for the past several years, which provide new information on reporting activities, geographic locations, and other filing trends noted during the quarter. 8 FinCEN’s most recent Quarterly Report of mortgage loan fraud (MLF) suspicious activity reports, which is being published today, 9 shows financial institutions submitted 92,028 MLF SARs last year, a 31 percent increase over the 70,472 submitted in 2010. 10 The increase can primarily be attributable to mortgage repurchase demands. At the same time, the report tells a slightly different story if you look at just quarterly reports. Financial institutions submitted 17,050 MLF SARs in the 2011 fourth quarter, a 9 percent decrease in filings over the same period in 2010 when financial institutions filed 18,759 MLF SARs. While too soon to call a trend, the fourth quarter of 2011 was the first time since the fourth quarter of 2010 when filings of MLF SARs had fallen from the previous year. However, in taking a quick look at preliminary data of first quarter 2012 filings, this downward indicator in MLF filings appears to be continuing. The report also provides clues that there is significant improvement in mortgage lending due diligence since the height of the housing bubble. For example, 40 percent of MLF SAR narratives, where SAR filers provide details of why an activity appears suspicious, indicated the filing institution turned down the subject’s loan application, short sale request, or debt elimination attempt because of the suspected fraud reported in the SAR. What this tells us is that those of you or your staff responsible for reviewing the loan applications are not just spotting, but helping to prevent fraud before a scammer can complete the transaction. FinCEN’s Web site also has a page dedicated to capturing the numerous studies and data available to the public11 as well as a page featuring information related to the work of the Financial Fraud Enforcement Task Force (FFETF),12 which was established by President Obama in November 2009 to hold accountable those who helped bring about the last financial crisis, and to prevent another crisis from happening.13 If you are not already signed up to receive automatic e-mail updates on new mortgage fraud related information published on FinCEN’s Web site, I encourage you to do so. 14 fincen.gov/news_room/testimony/html/20120423.html
Posted on: Sun, 28 Dec 2014 22:37:30 +0000
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