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Washington
FFIEC FinCEN take up mortgage fraud issues
WASHINGTON (2/19/10)--The Federal Financial Institutions Examination Council on Thursday released an updated version of its white paper on mortgage fraud detection and deterrence. The white paper, which aims to “help examiners understand, identify, and detect mortgage fraud schemes and elements,” provides details on several types of mortgage fraud methods, including builder bailouts, buy and bail schemes, double selling, equity skimming, fictitious loans, and short sale, loan modification, refinancing, mortgage servicing, property flip, and reverse mortgage frauds. The paper also details methods used to perpetrate these schemes, including asset rental, fake down payments, fraudulent documentation and appraisals, and identity theft. While the white paper “does not establish any new examination policies or procedures” and does not “impose new requirements on regulated financial institutions,” it substantially updates the information contained in a 2005 edition of the white paper, “gives examples of how individuals commit fraud, provides a list of red flags, and outlines best practices” that can be used to “detect and prevent mortgage fraud at regulated institutions and avert the losses that can result.” In related news, the Financial Crimes Enforcement Network (FinCEN) on Thursday advised financial institutions to be more aware of activities that may potentially trigger a suspicious activity report, including trade-based money laundering methods such as “misrepresenting the price and quantity of goods and services” and “double invoicing.” Other methods for obscuring the origin or destination of illegally-obtained funds include “third party payments for goods or services made by an intermediary,” and this activity may be signaled by “amended letters of credit without reasonable justification,” the inability of a customer to “produce appropriate documentation to support a requested transaction,” or “significant discrepancies between the descriptions of the goods on the transport document, the invoice, or other documents. Financial institutions should also be wary of the potential for black market funds to be transferred via money orders or wire transfers, especially when the “ordering party of the wire does not live in the country from which the wire originated.” Funds that are transferred into U.S.-based accounts and “subsequently transferred out of the account in the same or nearly the same amounts” are another potential warning sign, according to FinCEN.
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