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. Should FinCEN require information about the seller? see also FinCEN published a number of reports tracking the rise of mortgage fraud SARs covering geographic trends and fraud typologies. A survey of court cases indicates that real estate used in money laundering is not limited to properties that sell for greater than $300,000, the current GTO threshold. [37] Share of Homes Bought With All Cash Hits 30% for First Time Since 2014, https://www.qld.gov.au/law/fair-trading - Queensland Only NSW Fair Trading (NSW) The NSW Fair Trading has control over agents is absolute and is dictated by the state-specific legislation Property and Stock Agents Act 2002 (NSW) . https://thesentry.org/about/. commercial, farmland). The Currency and Foreign Transactions Reporting Act of 1970, as amended by the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act), the Anti-Money Laundering Act of 2020 (AML Act), and other legislation, is the legislative framework commonly referred to as the BSA. According to its website, The Sentry is an investigative and policy team that follows the dirty money connected to African war criminals and transnational war profiteers and seeks to shut those benefiting from violence out of the international financial system. About The Sentry, The Sentry, 81. Start Printed Page 69600 Each document posted on the site includes a link to the in Manhattan and Miami in Covered Transactions. How would FinCEN's regulatory requirements be integrated into your business' current compliance program? 2009); The result is an opaque field full of diverse foreign and U.S. domiciled legal entities associated with transactions worth hundreds of millions Should FinCEN utilize an existing BSA form or develop a new reporting form for any proposed regulation? FinCEN nevertheless invites comment on the geographic reach of any proposed regulation, whether the geographic coverage should be limited, and any underlying information to support such limitations. v. 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. 67. Financial Crimes Enforcement Network (FinCEN), Treasury. Realtor.com, What general factors should FinCEN consider in determining which transactions to cover? white young green planning regatta house clippers quay salford quays manchester m50 3xp tel 0161 872 3223 fax 0161 872 3193 lancaster retail study final report - volume See generally Money laundering vulnerabilities exist throughout the United States real estate market. Case No. [45] Several key factors contribute to the systemic vulnerability of the U.S. real estate market to money laundering. The Public Inspection page may also As Treasury explained in its 2020 National Strategy for Combating Terrorist and Other Illicit Financing, [c]riminals with widely divergent levels of financial sophistication use real estate at all price levels to store, launder, or benefit from illicit funds. In that report Treasury identified the risks of the laundering of illicit proceeds through real estate purchases as a main vulnerability and key action item for strengthening the U.S. Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) framework. 0000000703 00000 n terms of Section 19 of the Property Valuers Professional Act (Act No 47 of 2000). What are the money laundering risks of commercial versus residential transactions? This expansion of the GTOs to cover wire transfers was authorized by the Countering America's Adversaries through Sanctions Act (CAATSA), Public Law 115-44 (Aug. 2, 2017) (codified at 31 U.S.C. Under the Real Estate GTOs, only cash purchases by the following legal entities are reportable transactions: a corporation, limited liability company, partnership or other similar business entity, whether formed under the laws of a state, or of the United States, or a foreign jurisdiction, other than a business whose common stock or analogous equity interests are listed on a securities exchange regulated by the Securities and Exchange Commission (SEC) or a self-regulatory organization registered with the SEC, or an entity solely owned by such a business. Given the known money laundering typology of using shell companies to obscure the ultimate owners of real estate, FinCEN believes these entities should likely be covered in any proposed regulation. These individuals were sometimes another member of the criminal organization but were often a family member or personal associate of the criminal.[71] Anti-money laundering and counter-terrorist financing measures in the United States2016, Mutual Evaluation Report, Financial Action Task Force, p. 120 (Dec. 2016). https://www.nytimes.com/2015/02/08/nyregion/stream-of-foreign-wealth-flows-to-time-warner-condos.html. Section 32 (3) of the Property and Stock Agents Act 2002 (NSW) sets out that, at a minimum, proper supervision includes the requirements to: Properly supervise persons engaged in the business. FinCEN subsequently focused on the money laundering vulnerabilities in financed real estate transactions, as approximately 80% of real estate transactions are financed by a loan from a financial institution. This requirement includes supervising employees and establishing and monitoring compliance procedures. [9], Concerns about the abuse of the real estate market have also been extensively reported by the press, academia, and civil society organizations. If you are a member and have questions about the Supervision Guidelines, you can call the REINSW Helpline on (02) 9264 2343 or email [emailprotected]. What are the potential benefits and costs to including real estate brokers and agents, title agencies and/or insurance companies, or real estate attorneys in the definition of persons involved in real estate closings or settlements? that agencies use to create their documents. Further, in the FATF's 2016 Mutual Evaluation Report (MER) of the United States, the FATF identified numerous money laundering vulnerabilities in the U.S. real estate sector, noting that purchasers often use legal persons to hold real estate and the opaqueness of legal persons . 69. Louise Story, et al., Towers of Secrecy, Parts 1-7, N.Y. Times, (Feb. 7-Dec. 14, 2015), Real estate is important for money laundering, because it is a non-transparent market where the values of the objects are often difficult to estimate and where big value increases can happen and is an efficient method to place large amounts of money.); 188 A.3d 1009 (MD Ct. App. This means that all licensees in charge need to go through the new version of the Supervision Guidelines, point by point, and ensure that they can demonstrate compliance. Real estate may be held directly or indirectly through nominees, legal entities (such as one or more shell holding companies), or through various investment vehicles. Summary of August 2021 Existing Home Sales Statistics, National Association of Realtors (Sep. 22, 2021), 386 F. Supp. 79. Holland & Knight, LLP, Closing Commercial Real Estate Transactions, (May 9, 1995). 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? v. Miller, What general factors should FinCEN consider in determining the scope of such a rule? LLC as Rights Agent (incorporated herein by reference to to Exhibit 4.1 of the Company's Form 8-K filed on November 14, 2022) . 5312(a)(2)(U). 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] 75. Broadly speaking, FinCEN has serious concerns with the money laundering risks associated with the commercial real estate sector. [76] 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. 70. https://www.fairtrading.nsw.gov.au/ - NSW Only Consumer Affairs (VIC) It seems straightforward enough, but what is proper supervision and who does the supervising? United States Comments may be submitted, identified by Regulatory Identification Number (RIN) 1506-AB54, by any of the following methods: Federal E-rulemaking Portal: http://www.regulations.gov. How would FinCEN's regulatory requirements be integrated into your current compliance program? www.smartandskilled.nsw.gov.au https://cdn.nar.realtor/sites/default/files/documents/2021-07-26-nar-real-estate- requirement for persons involved in real estate closings and settlements (2003 ANPRM). Atty. 72. 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556 556 556 556 333 500 278 556 500 722 500 500 500 334 260 334 584 750 556 750 222 556 333 1000 556 556 333 1000 667 333 1000 750 611 750 750 222 222 333 333 350 556 1000 333 1000 500 333 944 750 500 667 278 333 556 556 556 556 260 556 333 737 370 556 584 333 737 552 400 549 333 333 333 576 537 278 333 333 365 556 834 834 834 611 667 667 667 667 667 667 1000 722 667 667 667 667 278 278 278 278 722 722 778 778 778 778 778 584 778 722 722 722 722 667 667 611 556 556 556 556 556 556 889 500 556 556 556 556 278 278 278 278 556 556 556 556 556 556 556 549 611 556 556 556 556 500 556 500 ] /Encoding /WinAnsiEncoding /FontDescriptor 20 0 R >> endobj 24 0 obj << /Length 25 0 R /Filter /FlateDecode >> stream How are those risks mitigated and what are the associated costs of that mitigation? to maintain appropriate procedures, including the collection and reporting of certain information as the Secretary of the . Check them out. See What percentage of residential real estate purchases are all-cash transactions? COVID-19 and the Future of Commercial Real Estate Finance, Congressional Research Service (Oct. 19, 2020). to the courts under 44 U.S.C. 23. However, any transaction threshold may enable money launderers to structure their behavior to avoid a reporting requirement. As a first step in this rulemaking process, FinCEN is issuing this ANPRM to seek initial public comment on questions that will assist FinCEN in the consideration and preparation of a proposed rule. 19. This PDF is How might such a rule impact your business? Hundtofte, C. Sean and Rantala, Ville, Anonymous Capital Flows and U.S. Housing Markets, University of Miami Business School, p. 23 (May 28, 2018); The Property and Stock Agents Act 2002 reforms which came into effect on 23rd March 2020, brought with them the revised Supervision Guidelines which extend upon the previous obligations on a licensee that arise from section 32 of the Act. This is set out in section 105 of the Property and Stock Agents Act 2002 which states: 105 INSPECTION OF LICENSEE'S RECORDS A licensee's records are at all reasonable times open to inspection by an authorised officer An authorised officer may require a person who has possession, custody or control of a licensee's records: 73. 16. v. see also 58. . [77] Delgado, The Act, which began in 2002, represented the most comprehensive reform of the law regulating the actions of NSW property agents in some 60 years. This ANPRM seeks public comment on whether FinCEN should impose a similar, ongoing, and expanded reporting requirement through regulations. [FR Doc. Should FinCEN implement information collection requirements only for transactions meeting a specified cost or value threshold? 29, 2018); on 82. 25. 30. containing beneficial ownership requirements, would affect the real estate industry. documents in the last year, 11 What kinds of professionals are most common in real estate transactions, such as real estate brokers, settlement agents, title insurers, attorneys, etc.? Div. 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. 5318(h)(2)(A), 5318(a)(6). 24. This table of contents is a navigational tool, processed from the 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. on . Information about this document as published in the Federal Register. This information is not part of the official Federal Register document. United States Patrick Ifediba, et al., How should FinCEN define residential real estate? v. 51. by the Housing and Urban Development Department or sale of Shares pursuant hereto (or such earlier time as may be required under the Act), in the form furnished by the Company to the Agent in connection with the offering of the Shares; "Prospectus" means the Prospectus Supplement (and any additional prospectus supplement prepared in accordance with the provision of Section 4(h) of this Agreement and filed in accordance with the . The Manual includes commentary, step-by-step procedures, checklists, and other documents and resources to help licensees not only comply with the Supervision Guidelines, but also embrace the highest standards of agency practice. 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. Post a review to our Google profile. Some professionals may be directly involved in marketing and structuring a real estate deal and are thus able to identify all relevant parties to the transaction. What burden (quantify if possible) would it places on such entities? The articles identified a specific set of real estate transactions as a high potential money laundering risk: The use of shell companies to pay for residential properties in cash at the time of closing, without a corresponding mortgage. 22. While a PDF of the Manual can be downloaded and printed, REINSW does not recommend it. FinCEN found that money laundering risks existed at lower price thresholds, and thus the current GTO set a $300,000 threshold for all covered jurisdictions. According to its website, GFI is a Washington, DC-based think tank focused on illicit financial flows, corruption, illicit trade and money laundering. About us, Global Financial Integrity, See ; Summary of August 2021 Existing Home Sales Statistics, National Association of Realtors (Sep. 22, 2021); Lawrence Yun, 2021 International Transactions in U.S. Start Printed Page 69598 https://cdn.nar.realtor/sites/default/files/documents/2021-07-26-nar-real-estate-forecast-summit-international-transactions-in-us-residential-real-estate-lawrence-yun-presentation-slides-07-26-2021.pdf https://www.census.gov/construction/nrs/pdf/newressales.pdf. In evaluating any potential imposition of general AML/CFT requirements, FinCEN must consider the extent to which the standards for AML/CFT programs are commensurate with the size, location, and activities of persons in this industry. Politically Exposed PersonsOverview, FFIEC BSA/AML Examination Manual, p. 290 (V5 2015); It has two parts: a principal statement that details mortgages, improvements, easements, planning controls, rates and taxes Delgado, real estate transactions without financing by a bank, RMLO, or GSE), which represent approximately 20% of real estate sales. If program or other requirements were limited to purchases above a certain price threshold, how would this impact: (i) The burden of implementing such potential rules; and (ii) the utility of such potential rules for addressing money laundering issues in the real estate market? United States and the orders now cover all U.S. title insurance companies operating in those areas. Jul. 2004) (purchase of multiple properties in a non-GTO-covered jurisdiction in New Jersey); If an iterative approach is warranted, FinCEN could initially focus on residential real estate followed by additional action to promulgate regulations covering the commercial real estate sector, as well as any other regulatory gaps that may exist with money laundering vulnerabilities involving real estate. See on Such a rule could be promulgated under 31 U.S.C. 26 CFR 1.6045-4 (Information reporting on real estate transactions with dates of closing on or after January 1, 1991). What kinds of professionals or participants are most able to request, verify, and report documentation related to purchasers? 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. 15, 2020) (purchase of property in Potomac, MD); Lakshmi Kumar & Kaisa de Bel, Acres of Money Laundering: Why U.S. Real Estate is a Kleptocrat's Dream, Global Financial Integrity, p. 29 (Aug. 2021) (highlighting money laundering cases outside of jurisdictions covered by the Real Estate GTOs). 5318(a)(2) or other potential mechanisms. [59] 62. mortgage, domestic wires, foreign wires, checks, currency, CVC). . Third, the lack of industry regulation for non-financed transactions exacerbates the money laundering vulnerabilities of the U.S. real estate market. Register (ACFR) issues a regulation granting it official legal status. 15, 2020). 17. Harris, Accordingly, the usefulness of the Real Estate GTO reporting data to law enforcement suggests that a regulatory requirement to ensure consistent reporting on a nationwide basis would facilitate law enforcement and national security agency efforts to combat illicit activity in this sector.[61]. 31. For the purposes of the 2016 Real Estate GTO, legal entity meant a corporation, limited liability company, partnership, or other similar business entity, whether formed under the laws of a state or of the United States or a foreign jurisdiction. Existing home sales constitute approximately 90% of the residential real estate transaction market. for better understanding how a document is structured but 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. 5318(h)(2)(B)(i)-(iii). All the significant inputs and assumptions in respect of the valuation process are developed in close consultation with management. 1 (D. Md. 74. State FinCEN therefore invites comment through this ANPRM on appropriate regulatory frameworks to do so, including possible nationwide recordkeeping and reporting requirements pursuant to 31 U.S.C. Tenn. Aug. 20, 2019) (multiple transactions under $10,000); v. Identify specific activities and services that present the highest and In view of this, FinCEN believes that there is a need for regulatory action notwithstanding industry efforts. See generally date of sale, location of property, sale price, and any other terms or conditions); (iv) the source of funds; (v) the form of payments ( information on legal entities[50] . 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