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The FinCEN is Looking Into Corruption Allegations for Cash Real Estate Transactions

The U.S. Department of Treasury in conjunction with the Financial Crimes Enforcement Network (FinCEN) is investigating real estate cash deals to root out money laundering.

MB Daily News-Raleigh, NC: The real estate industry is facing the possibility of stepped-up regulatory scrutiny comparable to the controls affecting banks, as part of a U.S. push to fight money laundering and corruption.

The Treasury Department’s Financial Crimes Enforcement Network, an anti-money-laundering enforcer, said Monday that it was seeking public comment on its plan to apply more scrutiny to all-cash real-estate transactions.

FinCEN said the “advance notice of proposed rulemaking” would help it “in preparing a proposed rule that would enhance the transparency of the domestic real estate market on a nationwide basis and protect the U.S. 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 valued at more than $300,000 in a dozen large U.S. cities.

Real-estate deals that rely on mortgages are scrutinized by the banks involved. All-cash transactions, on the other hand, are subject to a few rules. “As a result, corrupt officials and criminals engaging in illicit activity can exploit the U.S. real estate sector to launder their ill-gotten wealth,” the regulator said.

New regulations affecting the real-estate sector could include the imposition of controls and reporting requirements akin to those financial institutions face, a senior Biden administration official said.

FinCEN will consider whether to apply anti-money-laundering regulations to the real estate industry, as well as whether to require the filing of suspicious activity reports, or SARs, the official said.

Banks, money transmitters, and even casinos must file SARs if they suspect their businesses are being used for illicit purposes.

The real-estate sector, in contrast, has relatively few reporting requirements even though an estimated $2.3 billion was laundered through U.S. real-estate transactions from 2015 to 2020, according to an analysis cited by FinCEN.

More than half of those transactions involved so-called politically exposed persons, according to the analysis by the think tank Global Financial Integrity. These people are typically government officials, their relatives or close associates.

FinCEN said new regulations could include commercial real estate transactions, which aren’t covered by the current reporting requirements.

The regulator added that it wants to minimize 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 Monday. Other planks of the U.S. strategy include proposals to work more closely with foreign counterparts and impose stiffer penalties for corruption and money laundering.


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