BSA and Mortgage 2026: What Triggers a Suspicious Activity Report in a Loan File

The Bank Secrecy Act (BSA) requires financial institutions to maintain anti-money laundering (AML) programs and file reports on certain transactions. Non-bank mortgage lenders are covered institutions under the BSA and subject to FinCEN regulations. Every MLO working at a non-bank mortgage company is operating within their employer's BSA/AML compliance program, whether or not they interact with it directly.

Suspicious Activity Reports

A Suspicious Activity Report (SAR) must be filed when a transaction involves $5,000 or more and the institution knows, suspects, or has reason to suspect that the transaction involves funds from illegal activity, is designed to evade reporting requirements, or involves the use of the financial institution to facilitate criminal activity. The filer does not notify the subject of the SAR; this is confidential. SARs are filed with FinCEN within 30-60 days of detection depending on the type of suspicion. The act of filing a SAR is protected from civil liability in good faith situations.

Common Mortgage-Specific Red Flags

• ✦Cash down payment with no documented, legitimate source: large sums deposited in the weeks before closing from unidentified sources
• ✦Income that does not support the asset profile: a borrower earning $60,000 annually with $500,000 in a checking account and no explanation
• ✦Third-party wire for down payment from an entity or individual with no documented relationship to the transaction
• ✦Purchase price significantly above comparable market value with complex seller-funded arrangements that could mask kickbacks
• ✦Inconsistencies between application information and identity documents: name variations, SSN mismatches, or addresses that do not match any prior residence

What MLOs Should Do When Red Flags Appear

Do not close the transaction and then file a SAR as an afterthought. The obligation is to detect and escalate before funding where possible. Report the concern to your compliance department immediately. Document what you observed, the date you reported it, and to whom. Compliance will make the determination about whether to file a SAR and whether to proceed with the transaction. Do not tip off the borrower that a SAR is being considered or filed; this is a federal violation.