Mortgage Loan Originator (MLO) Licensing Practice Test

What is the primary purpose of Suspicious Activity Reports (SARs)?

1. Prevent identity theft

2. Detect and prevent money laundering

3. Track consumer spending habits

4. Identify fraudulent loan applications

The correct answer is: Detect and prevent money laundering

The primary purpose of Suspicious Activity Reports (SARs) is to detect and prevent money laundering. Financial institutions are required to file SARs when they notice unusual or suspicious activity that may indicate criminal behavior, such as money laundering or fraud. By reporting these activities, institutions contribute to broader efforts to identify and disrupt illicit financial activities, ensuring the integrity of the financial system. While options related to identity theft, consumer spending habits, and fraudulent loan applications may represent important considerations in financial transactions, they do not encapsulate the main function of SARs. Their primary focus is on identifying and reporting activities that could potentially be connected to money laundering schemes, thereby providing law enforcement with valuable information to combat financial crime. This aligns with regulations intended to enhance transparency and accountability in the financial sector.