67. documents in the last year, 24 15, 2020). Residential Real Estate, National Association of Realtors (Jul. Ky. 2012); The responsibility for reporting information to FinCEN was placed on title insurance companies because the title insurance industry is concentrated among a limited number of participants and title insurance companies play a central role in the vast majority of real estate transactions. See, e.g., Accordingly, the usefulness of the Real Estate GTO reporting data to law enforcement suggests that a regulatory requirement to ensure consistent reporting on a nationwide basis would facilitate law enforcement and national security agency efforts to combat illicit activity in this sector.[61]. Coffman, Do you anticipate being able to integrate or share implementation costs into your existing compliance-related budget? Why? Section 14 of act Aug. 20, 1912, provided that act Aug.seizure of nursery stock and . Are there alternative methods you believe FinCEN should consider as part of the overall rulemaking process that would effectively address the risk of money laundering in the all-cash real estate market? If so, what information should FinCEN require regarding the seller? Please explain how payment is most often tendered for real estate purchases ( 11. [28], In 2002, FinCEN temporarily exempted certain financial institutions, including persons involved in real estate closings and settlements and loan and finance companies, from the requirement to establish an AML/CFT program. 5326, FinCEN may issue such GTOs that impose additional reporting or recordkeeping requirements on financial institutions and nonfinancial trades or businesses in a geographic area for a limited period of time, if FinCEN has reasonable grounds to conclude that such requirements are necessary to carry out the purposes of the BSA or to prevent evasions thereof. v. The Company has filed with the Securities and Exchange Commission (the "Commission") and the Commission has declared effective, in accordance with the provisions of the Securities Act, a registration statement on Form S-3 (File No. These include Australian legal practitioners and persons who hold a licence or certificate under the Property, Stock and Business Agents Act 2002. See, e.g., United States Third, the lack of industry regulation for non-financed transactions exacerbates the money laundering vulnerabilities of the U.S. real estate market. Should FinCEN utilize an existing BSA form or develop a new reporting form for any proposed regulation? In some cases, such as the development of a large commercial real estate project, there may be many transactions involved in the development and conveyance of a commercial real estate property over the course of months or years. For example, in February 2015, 53. Treasury, working with law enforcement partners, has highlighted the money laundering risks and typologies associated with the U.S. real estate market. LLC as Rights Agent (incorporated herein by reference to to Exhibit 4.1 of the Company's Form 8-K filed on November 14, 2022) . 68. Accordingly, FinCEN intends to begin the rulemaking process to address such vulnerabilities. See generally Definition of Trust, Internal Revenue Service, 64. Describe any requirements that FinCEN could promulgate that adequately address these risks apart from typical AML/CFT programs, recordkeeping, and reporting obligations. [19] Finally, it may be relevant to identify those financial institutions or nonfinancial trades or businesses that are primarily involved in the transfer and presentation of purchase funds in exchange for title or other rights. by the Housing and Urban Development Department Realtor.com, Register (ACFR) issues a regulation granting it official legal status. ); (vi) the purpose of the transaction; (vii) the intended use of the proceeds of a sale; and (viii) the businesses involved in the transfer of funds? an NGO, published a report detailing the use of real estate purchases in the United States and elsewhere by PEPs to launder proceeds from political corruption. v. [37] 1 (S.D. Certification of Chief Financial Officer pursuant to 17 CFR 240.13a-14 promulgated under Section 302 of the Sarbanes-Oxley Act of 2002. Existing-Home Sales Climb 2.0% in July, National Association of Realtors, (Aug. 23, 2021), 30, 2020) (purchase of multiple properties in Cleveland, OH); FinCEN considers the issuance of such guidelines as a positive step and indicative of the commitment of the vast majority of real estate professionals to protecting the U.S. real estate sector from illicit activity. While every effort has been made to ensure that 10. v. Relevant information about this document from Regulations.gov provides additional context. Comm'n of Md. 2011). For instance, Redfin, a nationwide real estate brokerage, reported that 30% of home sales were all-cash transactions between January and April 2021. requirement. v. 0000004126 00000 n For example, a FinCEN advisory published in May 2017 stated that the proportion of such overlap was more than 30%. Nature of Recordkeeping and Reporting Requirements, B. 3d 690 (E.D. In later Real Estate GTOs, FinCEN excluded from the definition of legal entity any entity for which the shares are publicly traded on a U.S. stock exchange. FinCEN initially exempted persons involved in closings and settlements for six months, and then subsequently extended the temporary exemption indefinitely. in 2020, 5.64 million existing residential homes and 822,000 new homes were sold in the United States, for a total of 6.46 million transactions. FinCEN also solicits comments on whether and how to assign a reporting requirement to any or all of the following entities: Title insurance companies, title or escrow companies, real estate agents or brokers, real estate attorneys or law firms, settlement or closing agents, as well as other entities listed below in the comments section. e.g., Start Printed Page 69592 or sale of Shares pursuant hereto (or such earlier time as may be required under the Act), in the form furnished by the Company to the Agent in connection with the offering of the Shares; "Prospectus" means the Prospectus Supplement (and any additional prospectus supplement prepared in accordance with the provision of Section 4(h) of this Agreement and filed in accordance with the . The main components and processes are: 31 U.S.C. [62] documents in the last year, 87 See, e.g., United States 21, 2021), 78. Section 32(3) of the Property and Stock Agents Act 2002 (NSW) sets out that, at a minimum, proper supervision includes the requirements to: Again, this seems straightforward. 308, 1, 37 Stat. The Property and Stock Agents Act 2002 (NSW) provides that there is a cooling-off period for every agency agreement that relates to the sale of residential property or rural land in NSW. As a first step in this rulemaking process, FinCEN is issuing this ANPRM to seek initial public comment on questions that will assist FinCEN in the consideration and preparation of a proposed rule. Case 1:18-cr-00083-TSE, Doc. The types of illicit activity found in that analysis included: Structuring, money laundering, international transfers, tax evasion, and other illicit activity. The Secretary of the Treasury (Secretary) has delegated to the Director of FinCEN the authority to implement, administer, and enforce compliance with the BSA and associated regulations. Further, in the FATF's 2016 Mutual Evaluation Report (MER) of the United States, the FATF identified numerous money laundering vulnerabilities in the U.S. real estate sector, noting that purchasers often use legal persons to hold real estate and the opaqueness of legal persons . What specific requirements in these regulations do you expect may have the greatest impact on your operations? 25, 2018). 10. . Agents have a responsibility to act in ways that treat consumers and the public fairly through disclosure and professional behaviour. Policies and procedures already in place may be sufficient, however its likely that there will be gaps to fill and additional policies and procedures will need to be implemented to comply with the new version of the Supervision Guidelines. Bradley, If not, how common is the use of title insurance? but FinCEN's regulations exempt other persons involved in real estate closings and settlements from the requirement to establish AML/CFT programs, and the regulations do not impose a SAR filing requirement on such persons. 72. Case No. What would be the costs, burdens, and benefits associated with requiring a new form that would report key elements of information deemed highly significant by FinCEN? 0000000703 00000 n Start Printed Page 69595 . In the alternative, FinCEN could promulgate more general requirements for certain persons involved in non-financed real estate closings and settlements by requiring such persons to file SARs pursuant to FinCEN's authority under 31 U.S.C. This ANPRM seeks public comment on whether FinCEN should impose a similar, ongoing, and expanded reporting requirement through regulations. What kinds of professionals or participants are most able to request, verify, and report documentation related to purchasers? Other businesses in the real estate industry have estimated even higher rates of non-financed transactions. Instead, all-cash real estate transactions may involve only relatively small businesses or individuals involved in closing and settlement, and the participants may lack financial incentives to closely monitor the nature of the transactions. Illicit actors seek to conceal the origins of their illicit funds in a way that grows as an investment, cleans as much money as possible with each transaction, and allows them to enjoy the fruits of their illicit activity while minimizing potential losses from market instability and fluctuating exchange rates. https://thesentry.org/about/. www.smartandskilled.nsw.gov.au Also, Keep track of your CPD hours with the NEW CPD Diary in your member portal! What information should FinCEN require about the financial institution or nonfinancial trade or business reporting the transaction to FinCEN? 34. Moreover, one study found that the Real Estate GTOs had the added ameliorative effect of decreasing anonymous capital flows into the U.S. housing markets, thereby lessening the overall likelihood of BSA evasion via the real estate sector. for better understanding how a document is structured but Coffman, 14 (E.D. documents in the last year, 121 81 FR 29398 (May 11, 2016) (codified at 31 CFR 1010.230 and other sections in chapter X). [33] ; Summary of August 2021 Existing Home Sales Statistics, National Association of Realtors (Sep. 22, 2021); Lawrence Yun, 2021 International Transactions in U.S. Should AML/CFT programmatic requirements, if any, apply to residential transactions, commercial transactions, or both? The Manual includes commentary, step-by-step procedures, checklists, and other documents and resources to help licensees not only comply with the Supervision Guidelines, but also embrace the highest standards of agency practice. What general factors should FinCEN consider in determining the scope of such a rule? 52. Section 5311 was amended by Section 6002 of the AML Act to add the following additional purposes of the BSA: To prevent the laundering of money and the financing of terrorism through the establishment by financial institutions of reasonably designed risk-based programs to combat money laundering and the financing of terrorism; facilitate the tracking of money that has been sourced through criminal activity or is intended to promote criminal or terrorist activity; assess the money laundering, terrorism finance, tax evasion, and fraud risks to financial institutions, products, or services to protect the financial system of the United States from criminal abuse; and safeguard the national security of the United States; and establish appropriate frameworks for information sharing among financial institutions, their agents and service providers, their regulatory authorities, associations of financial institutions, the Department of the Treasury, and law enforcement authorities to identify, stop, and apprehend money launderers and those who finance terrorists. 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