Feds Plan Crackdown On Money Laundering In All-Cash Real Estate Deals

The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) is proposing a new strategy to address the threat of money laundering in all-cash transaction within the U.S. real estate.

What Happened: FinCEN does not mandate the Bank Secrecy Act’s general recordkeeping and reporting requirements in all-cash real estate transactions, although it has imposed specific transaction reporting requirements on title insurance companies.

To fill this gap, FinCEN announced an Advance Notice of Proposed Rulemaking (ANPRM) for public input on its plan to put more regulatory control on the use of all-cash transactions for commercial and residential real estate purchases, which the agency said was often used in money laundering schemes.

In a press statement, FinCEN warned that without being able to review a paper trail similar to what occurs in mortgage financing, “it can be nearly impossible to trace the beneficial owners behind shell companies that are often used to purchase the real estate.”

FinCEN also observed that the “relative stability of the real estate sector as store of value” continues to make it an attractive investment, thus making it a popular target for money laundering operations.

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What Happens Next: FinCEN stated the ANPRM will help it craft a proposed rule for enhancing transparency in real estate transactions while protecting the wider economy from criminal activity.

“Increasing transparency in the real estate sector will curb the ability of corrupt officials and criminals to launder the proceeds of their ill-gotten gains through the U.S. real estate market,” said Himamauli Das, acting director of FinCEN. “Addressing this risk will strengthen U.S. national security and help protect the integrity of the U.S. financial system.

“We urge stakeholders to provide input to assist us in developing an approach that enhances transparency while minimizing burden on business.”

Photo: Mohamed Hassan / Pixabay