On December 7, 2021, the Financial Crimes Enforcement Network (FinCEN) issued an Advance Notice of Proposed Rulemaking (ANPRM) with respect to soliciting public comments on potential requirements under the Bank Secrecy Act (BSA) for certain persons involved in real estate transactions to collect, report, and retain information.
FinCEN’s ANPRM expressed concern about the systemic money laundering vulnerabilities in the U.S. real estate sector. It observed that the ability of illicit actors to launder criminal proceeds through the purchase of real estate threatens U.S. national security and the integrity of the U.S. financial system. As a result, FinCEN will start the rulemaking process to address such vulnerabilities. As the initial step in this rulemaking process, FinCEN is issuing the ANPRM to seek initial public comment on questions that will assist FinCEN in the consideration and preparation of a proposed rule.
FinCEN is considering how best to focus its regulatory attention on residential and commercial real estate transactions. FinCEN observes that money laundering risks arise from transactions in both the commercial and residential real estate sectors. Hence, both merit appropriate regulatory treatment. Simultaneously, FinCEN recognizes that a repetitious approach may be required due to the complexities and differences between different market sectors and the potential burdens that new reporting and recordkeeping requirements may have for businesses.
FinCEN is considering to initially focus on residential real estate, followed by later issuing regulations covering the commercial real estate sector, as well as any other regulatory gaps that may exist with money laundering vulnerabilities concerning real estate.
Areas for Which Comments Are Requested
FinCEN seeks comment to help it in preparing a potential proposed rule that would seek to impose nationwide recordkeeping and reporting requirements on certain persons participating in transactions involving non-financed purchases of real estate. Until now, FinCEN has not imposed the BSA’s general recordkeeping and reporting requirements on businesses involved in non-financed real estate transactions. However, FinCEN has imposed more specific transaction reporting requirements on title insurance companies in the form of time-limited Geographic Targeting Orders under 31 U.S.C. 5326(a). The ANPRM requests public comment on whether FinCEN should impose a similar, ongoing, and expanded reporting requirement through regulations, specifically under 31 U.S.C. § 5318(g)(1) and related program requirements under 31 CFR 5318(h) .
In particular, FinCEN requests comment on the potential scope of any such regulations, including, among other things, (1) the persons who should be subject to the requirements; (2) which types of real estate purchases should be covered; (3) what information should be reported and retained; (4) the geographic scope of such a requirement; and (5) the appropriate reporting dollar-value threshold.
The ANPRM coincides with the organizing and hosting of President Biden’s Summit for Democracy on December 9, in which representatives of more than 100 countries will gather virtually. Combating corruption abroad starts with combating at home. Hence, the ANPRM aims to expose the owners of shell companies and other illicit funds. The initiative complements the Corporate Transparency Act, enacted as part of the Anti Money Laundering Act of 2020.
The current issue of the IELR will have a more comprehensive discussion of the implications of the ANPRM.