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1 1 (January 4, 2022)

handle is hein.crs/govefby0001 and id is 1 raw text is: SCongressional Research Service Inferrning the legislative debate sin ce 1914 Updated January 4, 2022 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, financial institution, law enforcement, policymaker, and regulatory stakeholders. Global 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 domestic and 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. Although real estate transactions often intersect with financial institutions that are subject to anti- money laundering (AML) and combating the financing of terrorism (CFT) requirements, AML/CFT gaps remain. The U.S. Department of the Treasury's 2020 National Strategy to Counter Illicit Finance states that Treasury is committed to working with Congress to minimize the risks of the laundering of illicit proceeds through real estate purchases-and identifies REML as among its top 12 AML priorities and supporting actions. Key reported REML risks and vulnerabilities include * real estate transactions involving opaque legal entities that obscure the natural persons who benefit from such property ownership; * use of nominee purchasers or title holders to conceal the true property owners; * complicit professionals in the real estate industry; * all-cash sales of high-value real estate that do not involve mortgage lenders; and * use of commercial real estate transactions to commit fraud, tax evasion, and money laundering, including international transfers involving politically exposed persons (PEPs) and organized crime figures. 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), reports that national security and foreign policy gaps remain in U.S. efforts to stop REML. A wide range of financial transparency advocacy organizations share FATF's concerns. U.S. Policy 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. This includes real estate brokers and agents, title or title insurance company representatives, closing agents, appraisers, inspectors, attorneys, and others. On December 2, 2021, FinCEN issued an Advance Notice of Proposed Rulemaking (ANPRM) to contemplate further AML recordkeeping and reporting requirements for certain persons involved in real estate transactions. 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. 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. Nevertheless, they are exempt under FinCEN rules from

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