Skip to main content

Non-Profits Question Money-Laundering Risk in Foreign Purchase of U.S. Property

Mar 11, 2015

A coalition of 17 non-profits is urging the federal government to force the real estate industry to proactively verify the identities of buyers of U.S. property and to screen them to determine if they pose any money-laundering risks.

In a letter to Jennifer Shasky Calvery, Director of the Treasury Department’s Financial Crimes Enforcement Network (FinCEN), the non-profits sought the repeal of 2002 temporary exemption granted to certain financial institutions and individuals involved in real estate transactions from the PATRIOT Act requirement that implemented anti-money laundering programs. They also urged FinCEN to “strengthen and finalize the rules proposed in August 2014 requiring financial institutions to conduct due diligence on legal entity customers similar to the requirement for individual customers.”

The non-profits cited a recent series of New York Times articles that they claimed “illustrates the ease with which it is possible to spend millions of dollars on anonymous real estate transactions facilitated by the real estate industry.”

“Investors mask the true ownership of property in the United States through anonymous companies,” the non-profits wrote. “The effects of such companies go far beyond hiding the ultimate owners of Manhattan’s real estate. Anonymous companies allow corrupt politicians and organized crime to transfer and hide illicitly acquired funds worldwide, and fuel an abuse of power and a culture of impunity. The ability to conceal their illicitly obtained gains fuels corruption, breeds instability and diverts resources from those they should benefit.

“The articles demonstrate the lack of due diligence by the real estate industry into buyers’ identities, backgrounds or the sources of their funds,” the letter continued. “This lack of due diligence by the real estate industry was also highlighted in the 2010 report issued by the U.S. Senate Permanent Subcommittee on Investigations, which showed how foreign kleptocrats and their close associates were undermining U.S. anti-money laundering controls to bring funds into the United States that may have been the product of foreign corruption.”

In an e-mailed statement to the New York Times, a FinCEN spokesperson said the agency would “continue to explore which requirements imposed on which actors in the real estate sector will best add to transparency beyond what can be obtained via existing and proposed requirements on other financial institutions, and via traditional law enforcement methods.”

Among the organizations signing the letter to FinCEN was the Center for Effective Government Citizens for Responsibility and Ethics in Washington, the Financial Accountability and Corporate Transparency (FACT) Coalition, Global Financial Integrity, Missionary Oblates USA, Oxfam America, Tax Justice Network USA, and the U.S. Public Interest Research Group.

About the author
Mar 11, 2015
In Wake Of NAR Settlement, Dual Licensing Carries RESPA, Steering Risks

With the NAR settlement pending approval, lenders hot to hire buyers' agents ought to closely consider all the risks.

A California CRA Law Undercuts Itself

Who pays when compliance costs increase? Borrowers.

CFPB Weighs Title Insurance Changes

The agency considers a proposal that would prevent home lenders from passing on title insurance costs to home buyers.

Fannie Mae Weeds Out "Prohibited or Subjective" Appraisal Language

The overall occurrence rate for these violations has gone down, Fannie Mae reports.

Arizona Bans NTRAPS, Following Other States

ALTA on a war path to ban the "predatory practice of filing unfair real estate fee agreements in property records."

Kentucky Legislature Passes Bill Banning NTRAPS

The new law prohibits the recording of NTRAPS in property records, creates penalties if NTRAPS are recorded, and provides for the removal of NTRAPS currently in place.