During an advertising approval, a licensing coordinator identifies an issue involving SAR escalation and anti-tipping rules. Which response is most compliant?
Correct Answer
D) Escalate the suspicious activity and keep SAR matters confidential
Why this is correct: The governing concept is the Bank Secrecy Act's requirements for Suspicious Activity Reports (SARs). SAR rules mandate that financial institutions report suspicious transactions that may indicate money laundering, fraud, or other crimes. A core component is the prohibition against "tipping off," meaning you cannot alert the subject of the transaction that a SAR has been or will be filed. The correct action, "Escalate the suspicious activity and keep SAR matters confidential," directly complies with both the duty to report and the duty of confidentiality. Why the other choices are wrong: "Continue the activity because the borrower appears willing to proceed" is wrong because borrower willingness does not override legal obligations to report suspicious activity. "Ignore the consumer-protection issue unless the borrower complains" is wrong because SAR obligations are proactive and not dependent on a consumer complaint. "Document the issue later instead of correcting the compliance problem first" is wrong because delaying escalation to document first violates the timing requirements for reporting suspicious activity. Exam tip: Remember the two key SAR rules: 1) Report/escalate suspicious activity, and 2) Never tip off the subject. Any answer that suggests proceeding, ignoring, or delaying violates these core duties.
Why This Is the Correct Answer
The correct response is "Escalate the suspicious activity and keep SAR matters confidential" because SAR rules require reporting or escalation of suspicious activity and prohibit tipping off subjects.
Why the Other Options Are Wrong
Option A: Continue the activity because the borrower appears willing to proceed.
Continue the activity because the borrower appears willing to proceed. is not correct because it does not apply the rule tested by this file scenario.
Option B: Ignore the consumer-protection issue unless the borrower complains.
Ignore the consumer-protection issue unless the borrower complains. is not correct because it does not apply the rule tested by this file scenario.
Option C: Document the issue later instead of correcting the compliance problem first.
Document the issue later instead of correcting the compliance problem first. is not correct because it does not apply the rule tested by this file scenario.
Memory Technique
SAR escalation and anti-tipping rules: identify the rule being tested, then choose the action that documents or applies that rule before the file moves forward.
Exam Tip
Match the file facts to SAR escalation and anti-tipping rules; do not choose an exception or shortcut that skips the required rule.
Common Mistakes to Avoid
- -Choosing an internal exception instead of the governing rule
- -Treating preliminary or informal facts as a substitute for required documentation
- -Answering from a familiar but unrelated mortgage topic
More Ethics & Fraud Questions
In a closing-readiness check, a disclosure specialist sees facts tied to Appraisal Fraud Detection. What should the file reflect?
An MLO recommends a loan with a low initial payment that will increase sharply in two years. The borrower says retirement income will be fixed and asks whether the payment can change. What is the appropriate response?
An MLO alters a bank statement to make the applicant's account balance appear higher and submits it to underwriting. Which response is appropriate?
A branch manager asks about a loan file because marketing proposes a rate the company is not prepared to offer. What should happen?
A borrower wants cash for necessary home repairs. A proposed refinance provides $15,000 cash but adds $12,000 in costs and extends repayment by 15 years. What is the best next step for the MLO?
Before closing, the team discovers that an ad shows an interest rate but omits the APR presentation. What is the safest compliant answer?
The loan team is resolving Privacy and Confidentiality during a quality-control sample. Which action best fits the rule?
A house last sold for $185,000 in January. In March it changes hands 3 times in 9 days, reaching $410,000, with the same appraiser and the same closing agent on every leg. Assuming the parties colluded to inflate appraisals without improvements to support the higher prices, what fraud scheme does this pattern illustrate?
For closings involving federally related mortgage loans, a title company pays a real estate brokerage $75 for each referred client who closes. The brokerage only passes along the client’s name and number. Does this referral payment comply with RESPA Section 8?
Before closing, the team discovers that a loan officer wants different terms because of a protected applicant characteristic. What is the safest compliant answer?
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