FACT Comment Letter Urges FinCEN to Address Dangerous Vulnerability Allowing Kleptocrats and Criminals to Stash Wealth in U.S.
WASHINGTON, DC – In a comment letter submitted yesterday, the FACT Coalition welcomed action by the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) to bring the U.S. real estate sector under the purview of federal anti-money laundering safeguards. The FACT Coalition offered guidance on how FinCEN should craft a rulemaking that would introduce permanent, nationwide standards to address illicit financial risks in the sector.
“Money laundering through the opaque, $50 trillion U.S. real estate sector undermines our national security and global democracy as it allows authoritarian states, human rights abusers, drug cartels, kleptocrats, and terrorists to both wash and invest the proceeds of corruption and other criminal activity – right in our backyard,” said Ian Gary, executive director of the FACT Coalition. “In initiating this rule, FinCEN has taken an important step to implement the new U.S. Strategy to Counter Corruption, but the agency will need to work with Congress to ensure it receives the resources it needs to deliver a strong rule in a timely manner.”
The FACT Coalition recommended that FinCEN reform and expand its real estate framework by pursuing a permanent and nationwide reporting regime that would require real estate professionals to identify the true nature of their clients. FACT also recommended that such a regime should apply to both commercial and residential real estate transactions, without monetary thresholds, and apply to both buyers and sellers of a real estate property.
“Not only does real estate money laundering undermine public safety, but it further puts a strain on housing markets in vulnerable communities, fanning the flames of the fair housing crisis in the United States,” said Mr. Gary. “Rooting out illicit funds from U.S. real estate would help increase the availability of housing and protect residents that could otherwise be subjected to absentee or capricious landlords. We support FinCEN’s efforts to bring more transparency to the U.S. real estate sector.”
In 2002, the Treasury Department identified the real estate sector as an industry that would be required to stand up anti-money laundering programs, but then granted the sector a “temporary” exemption from meeting those obligations. Twenty years later, that exemption is still in place. FinCEN is now reassessing the exemption in light of ongoing and consistent abuse of the real estate sector.
Previously, FinCEN has taken important but inherently limited steps to stem money laundering in real estate. Since 2016, a renewable Treasury pilot program – known as the real estate Geographic Targeting Orders (GTOs) – has required title agents to report to FinCEN the true, “beneficial” owner behind an entity making an all-cash purchase of real estate in up to 22 counties in the United States. These reports are only filed for all-cash residential transactions that exceed $300,000 in value. Additionally, the temporary nature of these orders demands that they be renewed every six months, introducing uncertainty for industry and increasing burden on the federal agency.
Notes to Editor:
- FinCEN’s advanced notice of proposed rulemaking (ANPRM) on real estate money laundering.
- FACT’s full comment letter on the FinCEN ANPRM on real estate.
- Comment submissions by FACT coalition members Global Financial Integrity, Anti-Corruption Data Collective, and Transparency International-US.
- Global Financial Integrity’s report, “Acres of Money Laundering: Why U.S. Real Estate is a Kleptocrat’s Dream”.