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FinCEN’s Proposed Rule Targets Money Laundering in Residential Real Estate

S.J. Steinhardt
Published Date:
Feb 8, 2024

iStock-807298046 House Homes Property Real Estate Analysis

The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a proposed rule aimed at deterring money laundering in the U.S. residential real estate sector.

The rule would increase transparency in the sector by requiring “certain persons involved in real estate closings and settlements to submit reports and keep records on identified non-financed transfers of residential real property to specified legal entities and trusts on a nationwide basis,” the proposal states. Transfers made directly to an individual would not be covered by this proposed rule.

“Illicit actors are exploiting the U.S. residential real estate market to launder and hide the proceeds of serious crimes with anonymity, while law-abiding Americans bear the cost of inflated housing prices,” FinCEN Director Andrea Gacki said in a statement. “Today marks an important step toward not only curbing abuse of the U.S. residential real estate sector, but safeguarding our economic and national security.”

Professionals involved in real estate closings and settlements would continue to be exempt from the anti-money laundering compliance program requirements of the Bank Secrecy Act under the proposed rule, a fact sheet issued by FinCEN stated.

"This draft rule sends a clear message that the U.S. plans to close off options for criminals looking to hide their ill-gotten gains in our real estate markets," said Ian Gary, executive director of the Financial Accountability and Corporate Transparency (FACT) Coalition, in a statement. "It is imperative that Treasury now finalize strong, permanent rules to prevent the misuse of U.S. residential and commercial real estate by foreign and domestic criminals, sanctioned Russian oligarchs, drug traffickers, sponsors of international terrorism, and other bad actors."  The FACT Coalition is "a nonpartisan alliance of more than 100 state, national, and international organizations working toward a fair tax system that addresses the challenges of a global economy and promoting policies to combat the harmful impacts of corrupt financial practices."

The roughly $50 trillion U.S. real estate sector has long been a favorite hiding place for the proceeds of corruption, drug trafficking and other international crimes, according to a report issued by Global Financial Integrity and the FACT Coalition in 2021.

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