75. Its no wonder that it's difficult to know where to start. Those factors include, but are not limited to, lack of transparency, attractiveness of the U.S. real estate market as an investment vehicle, and the lack of industry regulation. No. FinCEN notes that money laundering risks stem from transactions in both the commercial and residential real estate sectors, and both merit appropriate regulatory treatment. trailer << /Size 29 /Info 9 0 R /Encrypt 14 0 R /Root 13 0 R /Prev 16444 /ID[] >> startxref 0 %%EOF 13 0 obj << /Pages 10 0 R /Type /Catalog /Metadata 11 0 R >> endobj 14 0 obj << /Filter /Standard /R 2 /O ( UV.`Dz-#_m_}g) /U (^>28j'2WURk@) /P -60 /V 1 /Length 40 >> endobj 27 0 obj << /S 80 /Filter /FlateDecode /Length 28 0 R >> stream If you believe FinCEN should cover other forms of real estate, should FinCEN do so in conjunction with the regulation of residential real estate transactions or separately? Ky. 2012) (purchases of property for under $150,000); FinCEN began to receive feedback from law enforcement partners that the information was useful for generating new investigative leads, identifying new subjects in ongoing cases, and informing forfeiture efforts, among other things. Under the BSA, as amended by Section 6102(c) of the AML Act, the Secretary is also authorized to require a class of domestic financial institutions or nonfinancial trades or businesses to maintain appropriate procedures, including the collection and reporting of certain information as the Secretary of the Treasury may prescribe by regulation, to . [32] Does this differ for residential and commercial real estate? In a 2014 final rule, FinCEN extended similar requirements to the housing-related Government Sponsored Enterprises (GSEs)Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. https://www.cnbc.com/2020/12/11/buying-a-house-heres-where-all-cash-deals-are-most-competitive.html Ccile Remeur, Understanding money laundering through real estate transactions, European Parliament Research Service, PE 633.154, pp. FinCEN also invites comments on any additional financial institutions or nonfinancial trades or businesses that should be covered by a proposed regulation. 5318(h)(1)(A)-(D). How often are attorneys used in all-cash residential or commercial real estate transactions? eqAGNr9o6V$)/\Y}?l06s@(t5sc1#9Gc6:K5Se`M#_=(L[g!=3R25I8 jI=ZZM,R2w7\qf~k-)2 d'}NJaDY#$. . See, e.g., 3:15-cr-00037-2, 2019 U.S. Dist. Other businesses in the real estate industry have estimated even higher rates of non-financed transactions. 80. 81. [65], In 2018, the National Money Laundering Risk Assessment noted the vulnerability of commercial real estate to illicit activity, highlighting a 2013 case involving the laundering of drug proceeds by a real estate agent through real estate, including commercial properties. The 26. 31 U.S.C. The Secretary may prescribe minimum standards for such programs, and may exempt any financial institution from the application of such standards. . See, e.g., United States Commenters are urged to address the ability of various real estate-related businesses to gather this information for greater transactional transparency, as well as to support the effective administration of a SAR reporting program. Jul. requirement for persons involved in real estate closings and settlements (2003 ANPRM). The report further highlighted the use of shell companies and trusts to obscure the true owners of the properties.[18]. v. a business, if the commenter is a business), if any, assuming issuance of the rules? [19] . This requirement includes supervising employees and establishing and monitoring compliance procedures. A Proposed Rule by the Financial Crimes Enforcement Network on 12/08/2021. Federal Register issue. I tried. 4. Are there any jurisdictions or geographic areas within the United States in which residential real estate transactions have unique customs or requirements that would make designing a rule to cover such jurisdictions in conjunction with the remainder of the country problematic? documents in the last year, 36 Existing Home Sales, U.S. Census Bureau, https://www.census.gov/construction/nrs/pdf/newressales.pdf. https://www.census.gov/construction/nrs/pdf/quarterlysales.pdf. Section 32 of the Property, Stock and Business Agents Act, 2002 sets out the requirements in the Act with respect to the responsibilities of a licensee, as the person in charge of the business, to properly supervise the business carried on at that place. See generally The main amendments include: Reforms to licensing entry requirements for agents Provisions relating to the auction process including a new system of vendor bidding Changes to Agent's Code of Conduct. For the purposes of this ANPRM the term beneficial owner refers to that term as defined in the Real Estate GTOs and not the term as defined by the Corporate Transparency Act, Title LXIV of the AML Act. documents in the last year, by the International Trade Commission . documents in the last year, 83 40. Finally, it may be relevant to identify those financial institutions or nonfinancial trades or businesses that are primarily involved in the transfer and presentation of purchase funds in exchange for title or other rights. Such a specific reporting requirement could be imposed under 31 U.S.C. 2018) (several transactions under $20,000); 82. Harris, What are the money laundering risks of commercial versus residential transactions? e.g., Section 32(4) of the Property and Stock Agents Act 2002 (NSW) allows the Commissioner for NSW Fair Trading to issue guidelines as to what constitutes the proper supervision of the business. 386 F. Supp. 85 FR 57129 (Sep. 15, 2020) (codified at 31 CFR 1020.210). 2009) (purchase of multiple properties in El Paso, TX); 352(c), 115 Stat. 653 F.3d 729 (8th Cir. Should FinCEN's proposed rule be limited to residential real estate or should FinCEN cover transactions involving other forms of real estate ( The annualized transfer over the 10-year period was $118.05 million and $119.27 million at discount rates of 3 and 7 percent, respectively. 13. 5326). Which would be better and why? As to the nature of the rights to be acquired, the real estate may be held in See United States See generally Note 45 infra. The report further noted that there appeared to be an increasing trend towards using commercial real estate-related accounts to launder money for PEPs. Redfin.com e.g., 67 FR 21110-21112 (Apr. Not a member? The documents posted on this site are XML renditions of published Federal The prospectus of debut Eurobonds of the Development Bank of the Republic of Belaru FinCEN also invites general comments regarding the risk of money laundering and other illicit financial activities in the real estate market and the extent to which any reporting requirements would address that risk. 1:20-cv-23278, Doc. [74] 35. 15, 2020). Lawrence Yun, 2021 International Transactions in U.S. [52] How often are real estate brokers or agents used in all-cash residential real estate transactions? This count refers to the total comment/submissions received on this document as reported by Regulations.gov (last updated on 02/28/2023 at 12:35 pm). If not, why? https://www.justice.gov/usao-sdny/pr/acting-manhattan-usattorney-announces-59-million-settlement-civil-money-laundering-and. Embezzled Empire: How Kabila's Brother Stashed Millions in Overseas Properties, The Sentry, p. 3 (Nov. 2021). Please describe when an escrow account must be used for a real estate transaction. Exemptions 6. . Certain transaction participants may also be better positioned than others to understand the nature and purpose of the transaction, the source of funds, and the identity of the buyer, particularly natural persons or the beneficial owners behind any legal entity purchaser. B. . Residential Real Estate, National Association of Realtors (Jul. Real Estate Purchases by Natural Persons, A. Describe a typical commercial real estate transaction. What benefits, costs, and burdens does the commenter anticipate if all the AML/CFT requirements in the CDD rules are incorporated into any proposed rules? For commercial real estate? Based on the NAR estimates of total home sales and median sale prices, this means that approximately 1.21 million residential real estate transactions, with an approximate value of $463 billion, likely proceed without any AML reporting obligations. Raul Torres, 20. Indeed, a survey of recent state and federal court indictments and prosecuted cases demonstrates that real estate money laundering is not limited to the jurisdictions covered by the Real Estate GTOs. New Report Finds U.S. Real Estate Sector a Safe Haven for Money Laundering, Press Release, Global Financial Integrity (Aug. 9, 2021), https://www.nar.realtor/newsroom/existing-home-sales-climb-2-0-in-july Therefore, to ensure that licensees in charge always have access to the latest version, the Manual is in an online format. New Home Sales vs. 653 F.3d 729 (8th Cir. For purposes of the Real Estate GTOs, residential real property means real property (including individual units of condominiums and cooperatives) designed principally for the occupancy of from one to four families. 30. D. Which persons should be required to report information concerning real estate transactions to FinCEN? Form 10-K (annual report [section 13 and 15(d), not s-k item 405]) filed with the SEC documents in the last year, 24 Therefore, reference should always be had to the online version of the Manual as the central source of truth. the Federal Register. A uniform national requirement would also provide consistency and predictability to businesses required to maintain records and make reports. United States Should it apply to all or should only certain types of buyers and sellers included? https://www.nar.realtor/newsroom/existing-home-sales-recede-2-0-in-august By purchasing mortgage loans, extending loans secured by mortgages and other real estate-related collateral, and engaging in a variety of related financial activities, these entities are in a unique position to provide information on suspected mortgage fraud and money laundering that has proven valuable to law enforcement and regulators in the investigation and prosecution of mortgage fraud and other financial crimes. See The Public Inspection page Case No. 5318(h)(1)-(2). In evaluating reporting from the Real Estate GTOs issued since 2016, FinCEN and law enforcement agencies believe that a substantial proportion of the reported transactions for the purchase of property involved a beneficial owner who was also the subject of a SAR. 30 (N.D. Ohio Mar. 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