US Announces New Anti-Corruption Strategy, Treasury Evaluates Real Estate Industry Anti-Money Laundering Rule | Thomson Reuters Regulatory Intelligence and Compliance Learning


Government Takes Action to End Money Laundering Schemes Through Buying and Selling Real Estate Intended to Hide Illicit Gains

The US Treasury Department announced earlier this month an initiative to extend anti-money laundering (AML) obligations to the real estate industry and issued the first of a number of sanctions expected this week in as part of an anti-corruption campaign linked to the new version of the US government’s Anti-Corruption Strategy.

The strategy, which US President Joe Biden asked his national security team to start crafting in June, outlines a series of measures to more effectively root out corruption. These include the Treasury’s anti-money laundering rules aimed at controlling the real estate market, the publication of beneficial ownership transparency regulations already under development, and a campaign to prevent abuses. “Gatekeepers” of the financial system – such as lawyers, accountants, and company and trust service providers – help hide ill-gotten gains.

This month’s strategy and actions of the Treasury’s Financial Crimes Enforcement Network (FinCEN) and the Office of Foreign Assets Control (OFAC) have been released as pres. Biden hosted the Virtual US Democracy Summit with 110 attendees just days after the announcement.

New rules for real estate

FinCEN also issued a Regulatory Proposal Notice (ANPRM) aimed at “preparing a proposed rule that would improve the transparency of the national real estate market nationwide and protect the US real estate market from exploitation by criminals and criminals. corrupt officials ”. While saying it wants to focus on real estate cash transactions, the AML Treasury office noted that it “has long been concerned about the potential for corrupt officials and illicit actors to launder the proceeds of criminal activity through the purchase of real estate in the United States. “

Himamauli Das, Acting Director of FinCEN, said in a written statement that “increasing transparency in the real estate industry will reduce the ability of corrupt officials and criminals to launder the proceeds of their ill-gotten gains in the US real estate market. . Managing this risk will strengthen United States national security and help protect the integrity of the United States financial system. We urge stakeholders to provide feedback to help us develop an approach that improves transparency while minimizing the burden on business. “

A spokeswoman for the National Association of Realtors declined to comment. The public will have 60 days to comment once the ANPRM is published in the Federal Register.

If FinCEN chooses to move forward after receiving public comments, the next step would be to publish a proposed rule for real estate players, at which point the public would have another opportunity to comment before publication. potential of a final rule. The process would be long and likely to meet fierce resistance from real estate trading groups.

The Treasury’s concern about money laundering through real estate is not new. In 2002, FinCEN launched an anti-money laundering rule-making process for “persons involved in property fences and settlements”, similarly issuing an ANPRM aimed at addressing the risk of financial crime posed by real estate transactions. This regulatory push has withered without public explanation, although sources familiar with the matter claim that the complexity of the market and its many and diverse players has created a daunting challenge for FinCEN, which was widely viewed as underfunded before. Even the AML Act of 2020 does not create a slew of new obligations for the small office.

FinCEN is also working on the creation of a national register of beneficial owners to store information on the individuals behind shell companies, which are a favored tool of criminals seeking to disguise ownership of their assets. Speaking at an AML conference in September, Scott Rembrandt, assistant undersecretary for strategic policy at the Treasury, said the registry was “the key priority – our biggest goal”. FinCEN expects to announce its progress towards the creation of the register soon, according to press reports.

Anti-corruption push

Washington’s anti-corruption campaign comes after a series of leaked documents, including the October release of the Pandora Papers, raised questions about how government officials and others are quietly moving money to abroad, potentially to evade taxes or responsibility for wrongdoing.

Also earlier this month, OFAC sanctioned a national of the Democratic Republic of the Congo for allegedly supporting Israeli mine tycoon Dan Gertler, as part of a campaign to target corruption in that country. from Central Africa. In a written statement, OFAC said Alain Mukonda made payments to proxy bank accounts for Gertler after the Treasury blacklisted him in 2017. Mukonda allegedly made cash deposits totaling between $ 11 million and $ 13.5 million in accounts of companies he incorporated that ultimately belong to Gertler’s family.

The Treasury targeting against Mukonda was the first in a series of sanctions announcements ahead of Biden’s virtual summit.

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