AML CHALLENGES
Need or greed?
the following week. Matthew requested
a simple affidavit stating that Nicole’s
annual earnings were $62,000, just a formality, because no one would verify that,
according to Mathew’s explanations. There
was a catch, though. Nicole’s actual earnings were only $37,500. Her world faded
away with this request. There would be no
consolidation of credit cards and consumer
debts, no extra cash. Matthew insisted that
his request was routine and that many of
his clients with the same dilemma had
done the same without further consequences. If it were not for her Christian
beliefs preventing her from “cheating,”
Nicole would now be part of the long list
of irresponsible borrowers who followed
along with the instructions of loan officers
such as Matthew.Shady mortgage brokers:
A problem on the rise
This case is not a stand-alone case.
In April 2008, the Financial Crimes
Enforcement Network (FinCEN) issued
an update to its November 2006 report
describing trends and patterns shown in
suspicious activity reports (SARs) of suspected mortgage loan fraud filed between
April 1, 1996 and March 31, 2006. This
report highlighted that a growing number
of SARs indicated that mortgage brokers
initiated the fraudulent loan applications.
The numbers speak for themselves (see
Table 1).
related to a loan, aiding and abetting the
receipt of commissions or gifts from loans
by a bank employee, conspiracy to commit
money laundering.
Their scheme to defraud mortgage lenders centered upon the use of real estate
“flips” where someone purchases a property at one price and immediately sells or
“flips” the property to a “straw buyer” at a
higher price. A straw buyer or straw borrower is in individual who, in exchange
for money, “lends” his or her identity to
unscrupulous fraudsters. Many straw
buyers are not aware that they are entering
into a binding transaction where they have
to make the mortgage payments. Usually,
these loans go into default and the property is foreclosed on.
The 2007 Mortgage Fraud Report issued
by the FBI2 defines mortgage fraud as “the
intentional misstatement, misrepresentation, or omission by an applicant or other
interested parties, relied on by a lender or
underwriter to provide funding for, to purchase, or to insure a mortgage loan.”
Table 1
Mortgage
Bro