During a disclosure desk review, the MLO encounters a SAR Filing Requirements issue. Which response should avoid a shortcut that would misapply the rule?
Correct Answer
D) Follow SAR timing and confidentiality procedures
Why this is correct: Suspicious Activity Report (SAR) filing requirements under the Bank Secrecy Act mandate that financial institutions report suspicious transactions that may indicate money laundering or fraud. The rule includes strict procedures for timing (generally within 30 days of detection) and confidentiality (prohibiting "tipping off" the subject of the report). The correct response is to follow these established procedures. Why the other choices are wrong: Continuing the activity because the borrower appears willing to proceed is wrong; a borrower's willingness does not negate the duty to file a SAR on suspicious activity. Ignoring the consumer-protection issue unless the borrower complains is wrong; SAR obligations are triggered by the institution's detection of red flags, not by a consumer complaint. Using prior secondary-market delivery approval as a substitute for the current SAR requirement is wrong; SAR filing is a separate, mandatory compliance step that cannot be waived by approval from a different process. Exam tip: For SAR questions, key concepts are mandatory reporting, specific timing deadlines, and strict confidentiality (no tipping off).
Why This Is the Correct Answer
The correct response is "Follow SAR timing and confidentiality procedures" 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: Use prior secondary-market delivery approval as a substitute for the current SAR Filing Requirements requirement.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
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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