December 8, 2021
WASHINGTON D.C. – Global Financial Integrity (GFI) welcomes FinCEN’s Advanced Notice of Proposed Rulemaking (ANPR) to address money laundering through real estate. FinCEN, the U.S. Treasury Department’s key financial crime-fighting unit, underscored the risk posed by real estate noting that the sector presents “systemic money laundering vulnerabilities” which threaten “U.S. national security and the integrity of the U.S. financial system.” The ANPR was issued to seek public comment on regulations FinCEN may implement to address this issue.
Among the most notable regulatory changes include the possibility that FinCEN will expand reporting requirements to all-cash commercial real estate transactions everywhere in the United States. Current regulations only cover residential properties purchased without financing. In August, a GFI report titled “Acres of Money Laundering” highlighted the money laundering risks posed by commercial real estate. The study demonstrated that 30 percent of the 125 real estate money laundering cases reviewed were related to commercial properties. Under the proposed rule there would also be “no lower reporting dollar threshold” meaning that sales of commercial property of any value, if purchased in an all-cash deal, would be subject to reporting requirements.
Also under consideration is a possible expansion of record keeping and reporting of non-financed transactions by the various entities involved in real estate deals. FinCEN noted that it seeks comment on imposing reporting requirements to “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 trusts and other entities regardless of whether the transaction involved residential or commercial real estate.
GFI President & CEO Tom Cardamone noted that “given the inherent risk in the real estate sector and the massive amount of money involved in these transactions we believe it would be prudent to expand reporting requirements to as many entities and professions as possible.” Cardamone went on to say that “these risks have been known for years. The U.S. needs to greatly improve its reporting standards to keep pace with best practices as a way to protect national security.”
The ANPR noted that “several key factors contribute” to the role real estate plays in money laundering including opacity in the sector, the stability and increasing value of the market and current lack of “regulation for non-financed transactions.” Indeed, the ANPR noted that approximately $463 billion in residential real estate transactions “likely proceed without any [anti-money laundering] reporting obligations.” FinCEN also made clear the risk factors leave “a substantial portion of the real estate market” unprotected from the risks posed by potential money launderers.
The deadline for providing comments to FinCEN is February 4, 2022.
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ABOUT GFI: Global Financial Integrity (GFI) is a Washington, D.C.-based think tank, producing high-caliber analyses of illicit financial flows, advising governments on effective policy solutions and promoting pragmatic transparency measures in the international financial system as a means to improve global development and security and reduce inequality.
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