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1 1 (November 9, 2021)

handle is hein.crs/goveeud0001 and id is 1 raw text is: Congressional Resear h Service Infering the legislative debate sin ce 1914 0 November 9, 2021 Money Laundering in the U.S. Real Estate Sector Global Trends and Domestic Concerns Money laundering and other financial crimes in the real estate sector take many forms and continue to challenge real estate professionals, financial institutions, policy makers, law enforcement authorities, and regulatory stakeholders. Domestic and international scrutiny of the real estate market's vulnerability to money laundering has grown in recent years. An issue Congress may consider is how to balance the money laundering risks posed by the real estate sector against differing views on how to implement appropriate oversight. According to various sources, real estate money laundering (REML) schemes can involve a wide range of conventional domestic criminals, as well as transnational criminals, including drug cartels and human traffickers, international terrorists, and foreign kleptocrats (corrupt high-level officials). The purchase of real estate, often combined with methods to conceal a purchaser's identity and source of funds, can allow criminals to integrate ill-gotten proceeds into the legal economy or park illicit wealth abroad. Real estate transactions may intersect with banks and other financial institutions that are subject to anti-money laundering (AML) and countering the financing of terrorism (CFT) requirements. Some critics posit that current AML/CFT practices may not effectively deter REML. The U.S. Department of the Treasury's 2018 National Money Laundering Risk Assessment identified five key risks and vulnerabilities within the U.S. real estate sector: * transactions involving luxury residential real estate; * real estate transactions involving opaque entities; * all-cash transactions that do not involve mortgage lenders; * real estate transactions based on falsified loan application information; and * complicit professionals in the real estate industry. Congress has enacted legislation to address REML risks and vulnerabilities. In 1988, Congress amended the Bank Secrecy Act (BSA; 12 U.S.C. 1829b, 1951-1959 and 31 U.S.C. 5311-5314, 5316-5366) by adding, persons involved in real estate closings and settlements to the definition of a financial institution. In 2001, Congress further amended the BSA to require financial institutions, unless exempted, to establish AML programs. Over the past decade, Treasury has taken other steps to regulate aspects of the real estate sector, particularly with respect to residential mortgage lenders and originators and the government- sponsored enterprises Fannie Mae and Freddie Mac. Nevertheless, the Financial Action Task Force (FATF), the intergovernmental AML/CFT standards-setting body (of which the United States is a member), along with a wide range of U.S. and international financial transparency advocacy organizations, reports that national security and foreign policy gaps remain in U.S. efforts to stop REML. U. Polc The U.S. AML/CFT regime is statutorily based on the BSA and implemented through regulations in 31 C.F.R. Chapter X. The Treasury's Financial Crimes Enforcement Network (FinCEN) administers the BSA. Unlike banks and certain other financial institutions, the U.S. real estate industry as a whole is not subject to the full application of all BSA/AML requirements; however, certain financial reporting and recordkeeping requirements do apply. Establishing AML Programs Within the real estate sector, residential mortgage lenders and originators (since 2012), as well as Fannie Mae and Freddie Mac (since 2014), are subject to the BSA's requirement that financial institutions establish AML programs. Pursuant to 31 U.S.C. 5318(h), such AML programs should encompass the development of AML policies, procedures, and controls; the designation of an AML compliance officer; the provision of ongoing employee training; and the establishment of an independent audit function to test AML programs. Although persons involved in real estate closings and settlements are among the 26 categories of businesses or sectors defined by 31 U.S.C. 5312 as a financial institution, such persons are exempt from establishing AML programs. Persons involved in real estate closings and settlements are also exempt from requirements to file Suspicious Activity Reports (SARs or Form 111) and Currency Transaction Reports (CTRs), and to maintain a customer identification program (CIP) for AML recordkeeping purposes. In issuing an Advance Notice of Proposed Rulemaking (ANPRM) in 2003 on AML program requirements for persons involved in real estate closings and settlements, FinCEN expressed a desire to initiate a rulemaking that would place additional AML requirements on persons ttps://crsr

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