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 file escalation meeting, the supervisor sees facts tied to RESPA Kickbacks and Referrals. What should the file reflect?
In a closing-readiness check, a disclosure specialist sees facts tied to Appraisal Fraud Detection. What should the file reflect?
At closing, an MLO adds a single-premium credit-life policy to the loan amount even though the borrower declined it and the policy is not required for approval. Which practice is the clearest concern?
A refinance eliminates a borrower's fixed-rate loan, adds substantial fees, provides no cash or lower payment, and restarts a 30-year term. What should the MLO do before recommending it?
An applicant has verified monthly income of $5,000 and monthly obligations of $4,700 after the proposed mortgage payment. The applicant expects an undocumented raise next year. What should the MLO do?
A lender bases approval entirely on the home's high appraised value and does not verify the borrower's income or existing debts. What is the central compliance concern?
A borrower agrees to a mortgage but declines an optional home-warranty plan. The final loan documents nevertheless finance a $2,400 warranty premium. What should the MLO do?
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?
To obtain approval, an MLO changes a self-employed applicant's verified monthly income from $6,000 to $9,000 without supporting documentation. How should this conduct be characterized?
A homeowner is encouraged to refinance for the third time in 18 months. Each loan generates new points and fees, while the borrower's payment and rate do not improve. Which practice is most strongly indicated?
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