In a mortgage origination file, a borrower asks whether the company will file a suspicious activity report. Which action should be taken?
Correct Answer
B) Do not tell the borrower that a SAR may be filed
Why this is correct: The rule governing Suspicious Activity Reports (SARs) under 31 CFR 1029.320 includes a strict confidentiality requirement. Financial institutions and their employees are prohibited from disclosing to any person involved in the transaction that a SAR has been or may be filed. This "tipping off" rule is critical to prevent interference with law enforcement investigations. Therefore, the MLO must not tell the borrower about a potential or actual SAR filing. Why the other choices are wrong: "Continue the activity because the borrower appears willing to proceed" is irrelevant and wrong; the borrower's willingness has no bearing on SAR confidentiality rules. "Apply the state renewal timing rule even though the file is testing Suspicious activity and borrower information" is wrong because it applies an unrelated licensing rule to a SAR confidentiality issue. "Document the issue later instead of correcting the compliance problem first" is wrong because the compliance problem is the potential disclosure; the correct action is to not disclose, not to prioritize documentation. Exam tip: SAR confidentiality is absolute. Never disclose the existence of a SAR filing to the subject of the report. This is a key exam point.
Why This Is the Correct Answer
The correct response is "Do not tell the borrower that a SAR may be filed" because Lines 255-260; 31 CFR 1029.320 and final rule discussion of reports of suspicious transactions.
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 C: Apply the state renewal timing rule even though the file is testing Suspicious activity and borrower information.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Option D: 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
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