WH Reviews Real Estate Anti-Laundering Law

The Financial Crimes Enforcement Network (FinCEN) of the United States Treasury Department has been looking into the Office of Information and Regulatory Affairs for evaluation, completing the last step before a regulation may be officially submitted next year.

To close a loophole that anti-corruption advocates claim has enabled criminals to conceal their illicit gains in U.S. property, FinCEN has proposed a rule that real estate agents and brokers are expected to disclose the identities of the beneficial owners of companies that purchase real estate with cash.

To prevent criminals from using anonymously purchased luxury residences to launder money, the proposed regulation seeks to thwart savvy criminals who use real estate purchases no one intends to reside in. The transactions merely create a labyrinth of money transactions that are difficult to unravel.

According to Janet Yellen, the treasury secretary, $2.3 billion was laundered via the country’s real estate from 2015 to 2020. The department has the proposal on its regulatory agenda, but there is a chance that the timeframe may be shifted.

A continuing effort to establish a comparable regulation that would mandate disclosure of the owners of shell corporations has stalled the implementation of this rule, which officials had intended to execute in 2021. Most businesses formed or registered to conduct business in the United States, including corporations, limited liability companies, and others, must submit information about their beneficial owners according to a final rule published in October 2022 by FinCEN.

The new real estate regulation would expand the restrictions already administered by FinCEN in a few locations to the whole country. These rules are termed geographic targeting orders (GTOs). Roughly seven percent of GTO reports have linked persons or organizations to active FBI investigations. Just as the banking business has long been subject to regulations about the origin of client money and questionable transactions, the real estate market would likewise be subject to the new law.