[60] The maximum penalties are hefty, with corporations facing a penalty of up to $22,000 and individuals up to $11,000. 67. See Illicit actors, however, can take advantage of the opacity of shell companies or other legal entities or arrangements to mask their identity as the true beneficial owners of the property and their involvement in real estate transactions. Formally known as the Secretarys Guidelines for the Proper Supervision of the Business of the Licensee under section 32 of the Property and Stock Agents Act 2002, the Supervision Guidelines set out the minimum requirements to demonstrate compliance. Griev. FinCEN also solicits comments on whether and how to assign a reporting requirement to any or all of the following entities: Title insurance companies, title or escrow companies, real estate agents or brokers, real estate attorneys or law firms, settlement or closing agents, as well as other entities listed below in the comments section. www.smartandskilled.nsw.gov.au
. 859 F. Supp. Many comments suggested that the threat of money laundering through real estate warranted appropriate regulation, but commenters disagreed over the specific businesses that should be covered. 3 . 38. published a series of articles entitled Towers of Secrecy on the use of shell companies to purchase high-value residential real estate in New York City. [77] DOJ actions have exposed, for example, drug trafficking organizations funneling illicit proceeds into an investment firm and then using the proceeds to invest in commercial real estate ventures,[67] The 2016 GTO defined Covered Transactions as transactions involving a covered business where: (i) A legal entity; (ii) purchased residential real property; (iii) located in the Borough of Manhattan in NY, or Miami-Dade County in Florida; (iv) for a total purchase price of $1,000,000 or more in Miami, or $3,000,000 or more in Manhattan; (v) the purchase was made without a bank loan or other similar financing; and (vi) the purchase was made, at least in part, using a monetary instrument ( Moreover, one study found that the Real Estate GTOs had the added ameliorative effect of decreasing anonymous capital flows into the U.S. housing markets, thereby lessening the overall likelihood of BSA evasion via the real estate sector. 0000009028 00000 n
For a clear example of the vulnerabilities of the U.S. residential real estate sector for use to conceal funds by corrupt PEPs, a 2020 forfeiture complaint filed by the Department of Justice states that the former president of The Gambia, Yayha Jammeh, and his spouse, used funds derived from corruption to purchase residential properties in the United States. an NGO, published a study finding that an estimated $2.3 billion had been laundered through the U.S. real estate market over the previous five years. [38], In a 2020 final rule, FinCEN also imposed additional AML/CFT obligations on banks lacking a federal functional regulator, ensuring that such entities would be subject to requirements to have an AML/CFT program, meet Customer Identification Program (CIP) and Customer Due Diligence (CDD) requirements, including the verification of beneficial owners of legal entity accounts, in addition to their existing SAR obligations (which would include reporting on transactions involving suspicious real estate transactions).[39]. [23] 57. Under 31 U.S.C. It is not an official legal edition of the Federal Although a significant portion of those residential real estate transactions are financed by regulated RMLOs, GSEs, and depository institutions, non-financed real estate transactions can largely avoid financial institutions that are subject to AML/CFT requirements. This ANPRM seeks comment to assist FinCEN in preparing a potential proposed rule that would seek to impose nationwide recordkeeping and reporting requirements on certain persons participating in transactions involving non-financed purchases of real estate. documents in the last year, 83 FinCEN has not previously imposed the BSA's general recordkeeping and reporting requirements on businesses involved in non-financed real estate transactions, but FinCEN has imposed more specific transaction reporting requirements on title insurance companies in the form of time-limited Geographic Targeting Orders under 31 U.S.C. 50. Commenters are invited to comment particularly on the differences in practices, customs, and requirements for real estate transactions in geographic areas of the United States that merit specific consideration because of their relevance to the potential for the abuse of real estate transactions by money launderers. Is the definition of legal entity in the Real Estate GTOs too broad or too narrow? 2011) (multiple transactions under $100,000); How should FinCEN define residential real estate? https://cdn.nar.realtor/sites/default/files/documents/2021-07-26-nar-real-estate- What do persons involved in real estate transactions do if they have any suspicions about a transaction, customer, or source of funds? 29, 2018); According to figures published by NAR, in both 2020 and 2021, approximately 19% of existing residential home sale were non-financed transactions. https://cdn.nar.realtor/sites/default/files/documents/ehs-08-2021-summary-2021-09-22.pdf 31 U.S.C. The goal of this rulemaking process is to implement an effective system to collect and permit authorized uses of information concerning potential money laundering associated with non-financed transactions[1] 188 A.3d 1009 (MD Ct. App. See The commercial real estate market is both more diverse and complicated than the residential real estate market and presents unique challenges to applying the same reporting requirements or methods as residential transactions. No. FinCEN seeks comments on the questions listed below, but invites any other relevant comments as well. Treasury Order 180-01 (Jan. 14, 2020). It seems straightforward enough, but what is proper supervision and who does the supervising? FinCEN is especially interested in how such a regulation might be structured to address the differences between commercial and residential real estate transactions and whether the risk in non-residential real estate is sufficient to justify the burdens that a reporting requirement for non-residential real estate could impose. v. on In Socialism in Russia (2002), John Gooding writes that 'because the workers were not capable of being an effective revolutionary force', Lenin argued for a revolutionary party that 'had to be small, disciplined, conspiratorial and hierarchical: an elite of professional and utterly dedicated Marxist revolutionaries' - in short 'a . Moreover, data on real estate purchases is held in a patchwork of different state and county databases, making investigation and analysis difficult. Include 1506-AB54 in the submission. 2d 613 (M.D.N.C. guard against money laundering, the financing of terrorism, or other forms of illicit finance.[26], FinCEN's regulations implementing the BSA require banks, non-bank residential mortgage lenders and originators (RMLOs), and housing-related Government Sponsored Enterprises (GSEs) to file SARs and establish AML/CFT programs,[27] 26 CFR 1.6045-4. Yes, compliance with the Supervision Guidelines is mandatory and all real estate businesses must ensure that they can demonstrate the policies and procedures they have put in place in order to satisfy the obligations set out in the Supervision Guidelines. eqAGNr9o6V$)/\Y}?l06s@(t5sc1#9Gc6:K5Se`M#_=(L[g!=3R25I8 jI=ZZM,R2w7\qf~k-)2 d'}NJaDY#$. 52. Of note, the FATF found the United States' failure to regulate real estate transactions in line with the FATF standards to be a significant deficiency in the U.S. AML/CFT regime. Among the report's key findings, FinCEN found that property management, real estate investment, realty, and real estate development companies were the most commonly reported entities associated with commercial real estate-related money laundering. 2005) (transaction under $50,000). You cant afford to leave it to the last minute. estate currently are not subject to AML/CFT regulatory requirements because they do not involve financing underwritten by a financial institution subject to BSA requirements. Not a member? [29] Please submit comments by one method only. Later Real Estate GTOs changed the parameters of Covered Transactions to include new geographic areas, modify the reporting threshold, and cover additional payment methods. 45. 52. Law enforcement input and actions further indicate that residential real estate presents significant money laundering risk. The responsibility for reporting information to FinCEN was placed on title insurance companies because the title insurance industry is concentrated among a limited number of participants and title insurance companies play a central role in the vast majority of real estate transactions. Such a specific reporting requirement could be imposed under 31 U.S.C. 1:19CR390, Doc. 79. include documents scheduled for later issues, at the request [36] United States e.g., Definition of Trust, Internal Revenue Service, 03/01/2023, 43 5318(a)(2) or other potential mechanisms. Such an approach would involve the application of AML/CFT program rules that traditionally include four requirementsadoption of AML/CFT policies and procedures, designation of an AML/CFT compliance officer, establishment of an AML/CFT training program for appropriate employees, and independent testing of the program to ensure compliance. [21] [68], Finally, in August 2021, the NGO GFI reported that based on its review of 125 cases from the United States, United Kingdom, and Canada involving real estate money laundering, more than 30% of the cases involved commercial real estate and those cases generally involved significantly higher property values than the residential real estate cases studied.[69]. Being the first in 2007 to publish the full Dutroux X-Dossier file, including all the establishment names, after 1.5 years of research and writing, it was only natural to try and figure out if I could do the same with Haut de la Garenne when the case first made international headlines in 2008. 34. B. In January 2007, for example, the Financial Action Task Force (FATF), as the global standard setter for combatting money laundering, terrorism financing, and proliferation finance, published a wide-ranging report and series of recommendations that highlighted the vast scope of the money laundering problem in the real estate sector. Licensees who operate a real estate business have a duty to properly supervise that business. See generally Section 32 of the Property and Stock Agents Act 2002(NSW) sets out a requirement of licensees, to properly supervise businesses. For this rulemaking process, FinCEN is considering how best to focus its regulatory attention on residential and commercial real estate transactions. For example, in February 2015, FinCEN also welcomes comment on the appropriate transaction threshold, if any, for a reporting requirement. 2021). corresponding official PDF file on govinfo.gov. . Skip to content. United States If you are a member sign into update your communication preferences to ensure you don't miss an update. by the Housing and Urban Development Department Each of those regulations helped to ensure that many participants in financed real estate transactions were subject to AML/CFT program and reporting requirements, including to evaluate and protect against AML/CFT risks and identify and report suspicious activity. The President of the United States issues other types of documents, including but not limited to; memoranda, notices, determinations, letters, messages, and orders. First, the lack of transparency in the real estate market contributes to its vulnerability to money laundering activity. 1 (D. MD Jul. 76. Notably, during the GTO program, independent of any GTO reports, SARs filed by banks related to suspected money laundering in residential real estate transactions increased. should verify the contents of the documents against a final, official Nicholas Nehemas & Rene Rodriguez, How dirty is Miami Real Estate? Post a review to our Google profile. Australia August 29 2022 The Property and Stock Agents Regulation 2022 commences on 1 September 2022. 41. 12/07/2021 at 8:45 am. The European Union has regulated real estate transactions for the purposes of AML/CFT efforts since 2001. 17 . Buyers may use shell companies in many legitimate circumstances, such as when buyers use legal entities to shield themselves and their assets from liability related to the purchase of real property or as a means of protecting their privacy. A variety of perspectives on the U.S. real estate market will provide FinCEN with the information essential for any future rulemaking. FinCEN is considering, and invites comments on, such an approach. Start Printed Page 69601 The Census Bureau has further estimated that approximately 4.4% of new home sales are non-financed transactions. 5318(h)(1)(A)-(D). This information is not part of the official Federal Register document. The BSA also requires each financial institution to establish AML/CFT programs, including, at a minimum, (A) the development of internal policies, procedures, and controls; (B) the designation of a compliance officer; (C) an ongoing employee training program; and (D) an independent audit function to test programs.[24] For the purposes of this ANPRM, the terms non-financed purchase, non-financed transaction, all-cash purchase, and all-cash transaction refer to any real estate purchase or transaction that is not financed via a loan, mortgage, or other similar instrument, issued by a bank or non-bank residential mortgage lender or originator, and that is made, at least in part, using currency or value that substitutes for currency (including convertible virtual currency (CVC)), or a cashier's check, a certified check, a traveler's check, a personal check, a business check, a money order in any form, or a funds transfer. Later iterations of the Real Estate GTO required the GTO information to be reported via FinCEN Form 104 (Currency Transaction Report). 10. Since 2016, and most recently in October 2021, FinCEN has renewed the Real Estate GTOs multiple times (collectively, the Real Estate GTO program) and made modifications to their terms to address perceived gaps in the data collected. Aug. 6, 2020). Case 1:18-cr-00083-TSE, Doc. Consequently, there exists a vulnerability that illicit actors can exploit to launder the proceeds of criminal activity by purchasing real estate through all-cash transactions. 77. 32. United States 322 (Oct. 26, 2001); 31 U.S.C. See This topic provides an overview of an employee and supervisor's obligations under the Property and Stock Agents Act 2002 and Property and Stock Agents Regulation 2014. Fernandez, From 23 March 2020, this Act will be referred to as the Property and Stock Agents Act 2002. 7. 2. 2d 871 (E.D. 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