Financial Suspicious Activity Reports on appraisers spiking

The Financial Crimes Enforcement Network (FinCEN), an interagency unit devoted to money laundering and other financial criminal activity, reports periodically on official complaints or reports of suspicious activity and the nature of the complaint. Last month the agency reported that mortgage fraud allegations increased 41 percent from 2004 to 2005.

Alarmingly, 2,531 Suspicious Activity Reports (SARs) were filed by depository institutions on appraisers, an increase of 16.5 percent from 2004 and up 187 percent from 2003. The report – data here (.xls), summary here (.pdf) – deals with the number of SAR filings, so doesn't break out the total number of appraisers. The same appraiser may have had SARs filed from different people or clients. Still, if you're comfortable guessing 2,500 SARs might have been filed on 1,500 appraisers or more, that's one out of every 50 working in the U.S. today.

What is a SAR and why does a bank file one? The SAR form is here, and banks are required to file them under several circumstances. If a bank employee suspects a federal financial institution has been defrauded, including by a phony or inflated appraisal, a SAR is supposed to be filed.

When an appraiser is the subject of a SAR the bank is supposed to also report the incident to the appropriate state board. A federal agency responsible for enforcement under Title XI of FIRREA, like the FDIC, might also sanction an appraiser suspected of fraud.