Treasury’s FinCEN is seeking public comment on its plan to increase investigations into real estate transactions to help root out money laundering.
FinCEN said an “advance notice of the proposed rulemaking” would help formulate a proposed rule that would enhance transparency of the domestic real estate market nationwide and protect the US real estate market from exploitation by criminals and corrupt officials.
The regulator’s current rules require title-insurance companies to report all-cash residential real estate transactions worth more than $300,000 in a dozen large U.S. cities.
Real-estate deals that depend on mortgages are scrutinized by banks. On the other hand, all cash transactions are subject to certain rules. “As a result, corrupt officials and criminals engaging in illegal activities can take advantage of the US real estate sector to launder their illegal assets,” the regulator said.
A senior Biden administration official said new rules affecting the real estate sector could include enforcing the same control and reporting requirements as those of financial institutions.
The official said FinCEN will consider whether anti-money laundering regulations are implemented in the real-estate industry, as well as whether there is a need to file suspicious activity reports or SARs.
Banks, money transmitters and even casinos must file SARs if they suspect their business is being used for illegal purposes.
In contrast, the real-estate sector has relatively low reporting requirements, even though an estimated $2.3 billion was laundered through US real-estate transactions from 2015 to 2020, according to an analysis cited by FinCEN.
More than half of the transactions involved so-called politically exposed individuals, according to an analysis by think tank Global Financial Integrity. These people are usually government officials, their relatives or close associates.
FinCEN said the new rules could include commercial real estate transactions that do not fall under the current reporting requirements.
The regulator said that it wants to reduce the burden imposed on the real estate industry.
The focus on real estate is part of a broader effort to fight corruption that the Biden administration announced on Monday. Other issues of US strategy include proposals to work more closely with foreign counterparts and impose harsher penalties for corruption and money laundering.
Richard Vanderford at [email protected]