[Federal Register Volume 86, Number 233 (Wednesday, December 8, 2021)]
[Proposed Rules]
[Pages 69589-69602]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-26549]


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DEPARTMENT OF THE TREASURY

Financial Crimes Enforcement Network

31 CFR Chapter X

RIN 1506-AB54


Anti-Money Laundering Regulations for Real Estate Transactions

AGENCY: Financial Crimes Enforcement Network (``FinCEN''), Treasury.

ACTION: Advance notice of proposed rulemaking.

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SUMMARY: FinCEN is issuing this advance notice of proposed rulemaking 
(ANPRM) to solicit public comment on potential requirements under the 
Bank Secrecy Act (BSA) for certain persons involved in real estate 
transactions to collect, report, and retain information. The systemic 
money laundering vulnerabilities presented by the U.S. real estate 
sector, and consequently, 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. 
Accordingly, FinCEN intends to begin the rulemaking process to address 
such vulnerabilities. As a first step in this rulemaking process, 
FinCEN is issuing this ANPRM to seek initial public comment on 
questions that will assist FinCEN in the consideration and preparation 
of a proposed rule.

DATES: Written comments on this advance notice of proposed rulemaking 
may be submitted on or before February 7, 2022.

ADDRESSES: Comments may be submitted, identified by Regulatory 
Identification Number (RIN) 1506-AB54, by any of the following methods:
    Federal E-rulemaking Portal: http://www.regulations.gov. Follow the 
instructions for submitting comments. Include 1506-AB54 in the 
submission. Refer to Docket Number FINCEN-2021-0007.
    Mail: Financial Crimes Enforcement Network, Global Investigations 
Division, P.O. Box 39, Vienna, VA 22183. Include 1506-AB54 in the body 
of the text. Refer to Docket Number FINCEN-2021-0007.
    Please submit comments by one method only.

FOR FURTHER INFORMATION CONTACT: FinCEN: The FinCEN Regulatory Support 
Section at 1-800-767-2825 or electronically at [email protected].

SUPPLEMENTARY INFORMATION:

I. Background

    The goal of this rulemaking process is to implement an effective 
system to collect and permit authorized uses of information concerning 
potential money laundering associated with non-financed transactions 
\1\ in the United States real estate market. FinCEN expects that doing 
so will strengthen the United States' national security and the 
integrity of the U.S. financial system. With this ANPRM, FinCEN seeks 
input on how it should implement such a system, consistent with the 
Bank Secrecy Act (BSA), to maximize benefits while minimizing burdens 
on reporting financial institutions and nonfinancial trades or 
businesses.
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    \1\ For the purposes of this ANPRM, the terms ``non-financed 
purchase,'' ``non-financed transaction,'' ``all-cash purchase,'' and 
``all-cash transaction'' refer to any real estate purchase or 
transaction that is not financed via a loan, mortgage, or other 
similar instrument, issued by a bank or non-bank residential 
mortgage lender or originator, and that is made, at least in part, 
using currency or value that substitutes for currency (including 
convertible virtual currency (CVC)), or a cashier's check, a 
certified check, a traveler's check, a personal check, a business 
check, a money order in any form, or a funds transfer.

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[[Page 69590]]

    Money laundering vulnerabilities exist throughout the United States 
real estate market. These vulnerabilities are not limited to any 
particular sector. Although in recent years FinCEN has focused its 
information collection efforts on non-financed purchases of residential 
real estate by shell companies, FinCEN believes that other areas of the 
real estate market, such as commercial real estate and certain real 
estate purchases by natural persons, may merit regulatory coverage.
    For this rulemaking process, FinCEN is considering how best to 
focus its regulatory attention on residential and commercial real 
estate transactions. FinCEN notes that money laundering risks stem from 
transactions in both the commercial and residential real estate 
sectors, and both merit appropriate regulatory treatment. At the same 
time, FinCEN recognizes that an iterative approach may be warranted 
given the complexities and differences between different market sectors 
and the potential burdens that new reporting and recordkeeping 
requirements may have for businesses. If an iterative approach is 
warranted, FinCEN could initially focus on residential real estate 
followed by additional action to promulgate regulations covering the 
commercial real estate sector, as well as any other regulatory gaps 
that may exist with money laundering vulnerabilities involving real 
estate. FinCEN invites comments regarding the approach that it should 
take with respect to regulatory treatment of residential and commercial 
real estate and the money laundering threats presented by these 
sectors.
    This ANPRM seeks comment to assist FinCEN 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. FinCEN has not 
previously imposed the BSA's general recordkeeping and reporting 
requirements on businesses involved in non-financed real estate 
transactions, but 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). This 
ANPRM seeks public comment on whether FinCEN should impose a similar, 
ongoing, and expanded reporting requirement through regulations. Such a 
rule could be promulgated under 31 U.S.C. 5318(a)(2). FinCEN invites 
comments on alternative approaches to address the risk of money 
laundering in non-financed real estate transactions, including, for 
example, potentially promulgating general BSA recordkeeping and 
reporting requirements for ``persons involved in real estate 
settlements and closings'' under 31 U.S.C. 5318(g)(1) and related 
program requirements under 31 CFR 5318(h).\2\
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    \2\ 31 U.S.C. 5312(a)(2)(U).
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    FinCEN seeks comment on the potential scope of any such 
regulations, including, among other things: The persons who should be 
subject to the requirements; which types of real estate purchases 
should be covered; what information should be reported and retained; 
the geographic scope of such a requirement; and the appropriate 
reporting dollar-value threshold. FinCEN also invites general comments 
regarding the risk of money laundering and other illicit financial 
activities in the real estate market and the extent to which any 
reporting requirements would address that risk.

II. Money Laundering in Real Estate

    Treasury, working with law enforcement partners, has highlighted 
the money laundering risks and typologies associated with the U.S. real 
estate market. As Treasury explained in its 2020 National Strategy for 
Combating Terrorist and Other Illicit Financing, ``[c]riminals with 
widely divergent levels of financial sophistication use real estate at 
all price levels to store, launder, or benefit from illicit funds.'' In 
that report Treasury identified the risks of the laundering of illicit 
proceeds through real estate purchases as a main vulnerability and key 
action item for strengthening the U.S. Anti-Money Laundering/Countering 
the Financing of Terrorism (AML/CFT) framework. Law enforcement 
actions--including complaints, indictments, and prosecuted cases--
confirm the conclusions in the report on the linkages between real 
estate transactions and money laundering and other illicit 
activities.\3\
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    \3\ See, e.g., United States v. Real Property Located in 
Potomac, Maryland, Commonly Known as 9908 Bentcross Drive, Potomac, 
MD 20854, Case No. 20-cv-02071, Doc. 1 (D. MD Jul. 15, 2020); United 
States v. Raul Torres, Case No. 1:19CR390, Doc. 30 (N.D. Ohio Mar. 
30, 2020); United States v. Bradley, No. 3:15-cr-00037-2, 2019 U.S. 
Dist. LEXIS 141157 (M.D. Tenn. Aug. 20, 2019); United States v. Paul 
Manafort, Case 1:18-cr-00083-TSE, Doc. 14 (E.D. Va. Feb. 26, 2018); 
United States v. Miller, 295 F. Supp. 3d 690 (E.D. Va. 2018); United 
States v. Patrick Ifediba, et al., Case No. 2:18-cr-00103-RDP-JEO, 
Doc. 1 (N.D. Alabama Mar. 29, 2018); Atty. Griev. Comm'n of Md. v. 
Blair, 188 A.3d 1009 (MD Ct. App. 2018); United States v. Coffman, 
859 F. Supp. 2d 871 (E.D. Ky. 2012); United States v. Delgado, 653 
F.3d 729 (8th Cir. 2011); United States v. Fernandez, 559 F.3d 303 
(5th Cir. 2009); United States v. 10.10 Acres Located on Squires 
Rd., 386 F. Supp. 2d 613 (M.D.N.C. 2005); State v. Harris, 861 A.2d 
165 (Super. Ct. App. Div. 2004); ``United States Reaches Settlement 
to Recover More Than $700 Million in Assets Allegedly Traceable to 
Corruption Involving Malaysian Sovereign Wealth Fund,'' Press 
Release, Department of Justice (Oct. 30, 2019), https://www.justice.gov/opa/pr/united-states-reaches-settlement-recover-more-700-million-assets-allegedly-traceable; ``Acting Manhattan U.S. 
Attorney Announces $5.9 Million Settlement of Civil Money Laundering 
And Forfeiture Claims Against Real Estate Corporations Alleged to 
Have Laundered Proceeds of Russian Tax Fraud,'' Press Release, 
Department of Justice (May 12, 2017), https://www.justice.gov/usao-sdny/pr/acting-manhattan-usattorney-announces-59-million-settlement-civil-money-laundering-and.
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    Indeed, as the Congressional Research Service recently noted, real 
estate money laundering ``schemes can involve a wide range of 
conventional domestic criminals, as well as transnational criminals, 
including drug cartels and human traffickers, international terrorists, 
and foreign kleptocrats (corrupt high-level officials).'' \4\ As such, 
``[t]he purchase of real estate, often combined with methods to conceal 
a purchaser's identity and source of funds, can allow criminals to 
integrate ill-gotten proceeds into the legal economy[.]'' \5\
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    \4\ ``Money Laundering in the U.S. Real Estate Sector,'' 
Congressional Research Service (Nov. 9, 2021).
    \5\ Id.
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    Reports by foreign governments, international standard setters, and 
a variety of reports by non-governmental organizations (NGOs), inter-
governmental organizations, academics, trade organizations, media, and 
other members of civil society confirm the substantial risk that the 
real estate market presents for the money laundering problem.
    In January 2007, for example, the Financial Action Task Force 
(FATF), as the global standard setter for combatting money laundering, 
terrorism financing, and proliferation finance, published a wide-
ranging report and series of recommendations that highlighted the vast 
scope of the money laundering problem in the real estate sector. The 
FATF has issued guidance--most recently in June 2021--recommending AML/
CFT requirements for certain entities involved in real estate 
transactions.\6\ Further, in the FATF's 2016 Mutual Evaluation Report 
(MER) of the United States, the FATF identified numerous money 
laundering vulnerabilities in the U.S. real estate sector, noting that 
``purchasers often use legal persons to hold real estate and the 
opaqueness of legal persons . . . is a

[[Page 69591]]

vulnerability which can be exploited by illicit actors.'' \7\ Of note, 
the FATF found the United States' failure to regulate real estate 
transactions in line with the FATF standards to be a significant 
deficiency in the U.S. AML/CFT regime.
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    \6\ See generally ``Money Laundering & Terrorist Financing 
through the Real Estate Sector,'' Financial Action Task Force (Jun. 
29, 2007); see ``International Standards on Combating Money 
Laundering and the Financing of Terrorism & Proliferation: The FATF 
Recommendations,'' Financial Action Task Force, pp. 19-20 (Jun. 
2021).
    \7\ ``Anti-money laundering and counter-terrorist financing 
measures in the United States--2016,'' Mutual Evaluation Report, 
Financial Action Task Force, p. 120 (Dec. 2016).
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    The European Union has regulated real estate transactions for the 
purposes of AML/CFT efforts since 2001.\8\ In 2019, the European 
Parliament Research Service (EPRS), the European Parliament's in-house 
research service, published a briefing indicating the widespread use of 
real estate in money laundering, and in particular, highlighted the 
necessity of identifying purchasers of real estate and proper 
regulatory coverage of professionals involved in such transactions via 
AML reporting mechanisms.\9\
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    \8\ See ``Directive 2001/97/EC of the European Parliament and of 
the Council of 4 December 2001 amending Council Directive 91/308/EEC 
on prevention of the use of the financial system for the purpose of 
money laundering,'' OJ. L. 344, pp. 76-82 (Dec. 28, 2001).
    \9\ See C[eacute]cile Remeur, ``Understanding money laundering 
through real estate transactions,'' European Parliament Research 
Service, PE 633.154, pp. 5-7 (Feb. 2019).
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    Concerns about the abuse of the real estate market have also been 
extensively reported by the press, academia, and civil society 
organizations. For example, in February 2015, The New York Times 
published a series of articles entitled ``Towers of Secrecy'' on the 
use of shell companies to purchase high-value residential real estate 
in New York City.\10\ The Times also found that shell companies 
purchased nearly half of the most expensive residential properties in 
the United States.\11\ The articles identified a specific set of real 
estate transactions as a high potential money laundering risk: The use 
of shell companies to pay for residential properties in cash at the 
time of closing, without a corresponding mortgage.\12\
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    \10\ See generally Louise Story, et al., ``Towers of Secrecy,'' 
Parts 1-7, N.Y. Times, (Feb. 7-Dec. 14, 2015), https://www.nytimes.com/news-event/shell-company-towers-of-secrecy-real-estate.
    \11\ See Louise Story & Stephanie Saul, ``Stream of Foreign 
Wealth Flows to Elite New York Real Estate,'' N.Y. Times (Feb. 7, 
2015), https://www.nytimes.com/2015/02/08/nyregion/stream-of-foreign-wealth-flows-to-time-warner-condos.html.
    \12\ See also, e.g., Vandana Ajay Kumar, ``Money Laundering: 
Concept, Significance and its Impact,'' European Journal of Business 
and Management, p. 117 (Vol 4 No. 2 2012) (``The real estate sector 
is the largest and most vulnerable sector for money laundering. Real 
estate is important for money laundering, because it is a non-
transparent market where the values of the objects are often 
difficult to estimate and where big value increases can happen and 
is an efficient method to place large amounts of money.''); see also 
generally ``Money Laundering in Real Estate,'' Conference Report, 
Terrorism, Transnational Crime and Corruption Center, Schar School 
of Policy and Government, George Mason University (Mar. 25, 2018).
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    In February 2021, the National Association of Realtors (NAR), an 
industry trade organization, issued voluntary guidelines for real 
estate professionals that highlighted the vulnerability of the U.S. 
real estate market to money laundering, stating that ``many non-
financial businesses and professions are also vulnerable to potential 
money laundering schemes'' and ``[r]eal estate is believed to be used 
in money laundering schemes, making real estate professionals likely to 
encounter money laundering activities in the course of their 
business.'' \13\
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    \13\ ``Anti-Money Laundering Voluntary Guidelines for Real 
Estate Professionals,'' National Association of Realtors, p. 1 (Feb. 
21, 2021).
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    In August 2021, Global Financial Integrity (GFI),\14\ an NGO, 
published a study finding that an estimated $2.3 billion had been 
laundered through the U.S. real estate market over the previous five 
years. The study further noted that among the cases it reviewed, over 
50% involved Politically Exposed Persons (PEPs).\15\ Moreover, the 
study found that the ``use of anonymous shell companies and complex 
corporate structures continue[d] to be the number one money laundering 
typology'' involving real estate.\16\
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    \14\ According to its website, GFI is ``a Washington, DC-based 
think tank focused on illicit financial flows, corruption, illicit 
trade and money laundering.'' ``About us,'' Global Financial 
Integrity, https://gfintegrity.org/about/.
    \15\ The term ``PEP'' generally includes a current or former 
senior foreign political figure, their immediate family, and their 
close associates. ``Politically Exposed Persons--Overview,'' FFIEC 
BSA/AML Examination Manual, p. 290 (V5 2015); see also ``Joint 
Statement on Bank Secrecy Act Due Diligence Requirements for 
Customers Who May Be Considered Politically Exposed Persons,'' Board 
of Governors of the Federal Reserve System, Federal Deposit 
Insurance Corporation, Financial Crimes Enforcement Network, 
National Credit Union Administration, Office of the Comptroller of 
the Currency (Aug. 21, 2020). For a clear example of the 
vulnerabilities of the U.S. residential real estate sector for use 
to conceal funds by corrupt PEPs, a 2020 forfeiture complaint filed 
by the Department of Justice states that the former president of The 
Gambia, Yayha Jammeh, and his spouse, used funds derived from 
corruption to purchase residential properties in the United States. 
See United States v. Real Property Located in Potomac, Maryland, 
Commonly Known as 9908 Bentcross Drive, Potomac, MD 20854, Case No. 
20-cv-02071, Doc. 1 (D. MD Jul. 15, 2020).
    \16\ Lakshmi Kumar & Kaisa de Bel, ``Acres of Money Laundering: 
Why U.S. Real Estate is a Kleptocrat's Dream,'' Global Financial 
Integrity, p. 4 (Aug. 2021).
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    And most recently, in November 2021, The Sentry,\17\ an NGO, 
published a report detailing the use of real estate purchases in the 
United States and elsewhere by PEPs to launder proceeds from political 
corruption. According to this report, these PEPs used a network of 
shell companies to move funds abroad and purchase millions of dollars 
of real estate, including 17 properties for a total of $6.6 million in 
Washington, DC, and Johannesburg, South Africa. The report further 
highlighted the use of shell companies and trusts to obscure the true 
owners of the properties.\18\
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    \17\ According to its website, The Sentry ``is an investigative 
and policy team that follows the dirty money connected to African 
war criminals and transnational war profiteers and seeks to shut 
those benefiting from violence out of the international financial 
system.'' ``About The Sentry,'' The Sentry, https://thesentry.org/about/.
    \18\ ``Embezzled Empire: How Kabila's Brother Stashed Millions 
in Overseas Properties,'' The Sentry, p. 3 (Nov. 2021).
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    Several key factors contribute to the systemic vulnerability of the 
U.S. real estate market to money laundering. Those factors include, but 
are not limited to, lack of transparency, attractiveness of the U.S. 
real estate market as an investment vehicle, and the lack of industry 
regulation.
    First, the lack of transparency in the real estate market 
contributes to its vulnerability to money laundering activity. Real 
estate may be held directly or indirectly through nominees, legal 
entities (such as one or more shell holding companies), or through 
various investment vehicles. Buyers may use shell companies in many 
legitimate circumstances, such as when buyers use legal entities to 
shield themselves and their assets from liability related to the 
purchase of real property or as a means of protecting their privacy. 
Illicit actors, however, can take advantage of the opacity of shell 
companies or other legal entities or arrangements to mask their 
identity as the true beneficial owners of the property and their 
involvement in real estate transactions.
    Second, the attractiveness of the U.S. real estate market as a 
stable vehicle for maintaining and increasing investment value also 
contributes to its vulnerability to money laundering activity. Illicit 
actors seek to conceal the origins of their illicit funds in a way that 
grows as an investment, ``cleans'' as much money as possible with each 
transaction, and allows them to enjoy the fruits of their illicit 
activity while minimizing potential losses from market instability and 
fluctuating exchange rates. Consequently, real estate--especially in a 
relatively stable market with strong private property protections such 
as in the United States--is an attractive asset to facilitate money 
laundering.
    Third, the lack of industry regulation for non-financed 
transactions exacerbates the money laundering vulnerabilities of the 
U.S. real estate market. Non-financed purchases of real

[[Page 69592]]

estate currently are not subject to AML/CFT regulatory requirements 
because they do not involve financing underwritten by a financial 
institution subject to BSA requirements. This leaves a substantial 
portion of the real estate market without the same AML/CFT protections 
and safeguards as those applicable to banks, casinos, or other 
financial institutions. Moreover, data on real estate purchases is held 
in a patchwork of different state and county databases, making 
investigation and analysis difficult.
    FinCEN recognizes the efforts by trade organizations for real 
estate professionals, such as the NAR (real estate agents and brokers) 
and the American Bar Association (settlement attorneys), to establish 
voluntary AML/CFT guidelines that their members may consider 
implementing to protect against illicit actors seeking to launder 
illicit funds.\19\ FinCEN considers the issuance of such guidelines as 
a positive step and indicative of the commitment of the vast majority 
of real estate professionals to protecting the U.S. real estate sector 
from illicit activity. Such guidelines, however, are not mandatory or 
subject to oversight or enforcement and may therefore be avoided by 
illicit actors. There is also limited information concerning how widely 
the industry has implemented such best practices and voluntary 
guidelines, or what other measures are in place to combat money 
laundering in the real estate sector. In view of this, FinCEN believes 
that there is a need for regulatory action notwithstanding industry 
efforts. FinCEN welcomes comments, however, on how the industry has 
implemented these voluntary guidelines, any challenges in 
implementation, their effectiveness, and whether FinCEN should consider 
including elements of existing voluntary guidelines in any potential 
rule.
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    \19\ See generally ``Anti-Money Laundering Guidelines for Real 
Estate Professionals,'' https://www.nar.realtor/articles/anti-money-laundering-guidelines-for-real-estate-professionals.
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    In sum, the U.S. real estate market can be an effective vehicle for 
money laundering and can involve businesses and professions that 
facilitate (even if unwittingly) acquisitions of real estate in the 
money laundering process. Accordingly, FinCEN views the structure of 
the U.S. real estate market to present money laundering vulnerabilities 
and considers that regulatory action is warranted to collect 
information from businesses and professions operating in the real 
estate sector in order to protect U.S. national security and the U.S. 
financial system.

III. Current Law

    The Currency and Foreign Transactions Reporting Act of 1970, as 
amended by the Uniting and Strengthening America by Providing 
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 
2001 (``USA PATRIOT Act''), the Anti-Money Laundering Act of 2020 
(``AML Act''), and other legislation, is the legislative framework 
commonly referred to as the BSA.\20\ The Secretary of the Treasury 
(``Secretary'') has delegated to the Director of FinCEN the authority 
to implement, administer, and enforce compliance with the BSA and 
associated regulations.\21\ The purposes of the BSA include requiring 
certain reports or records that ``are highly useful . . . in criminal, 
tax, or regulatory investigations, risk assessments, or proceedings,'' 
or ``in intelligence or counterintelligence activities, including 
analysis, to protect against international terrorism.'' \22\
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    \20\ The BSA is codified at 12 U.S.C. 1829b, 12 U.S.C. 1951-
1960, 31 U.S.C. 5311-5314 and 5316-5336, and includes notes thereto, 
with implementing regulations at 31 CFR chapter X.
    \21\ Treasury Order 180-01 (Jan. 14, 2020).
    \22\ 31 U.S.C. 5311. Section 5311 was amended by Section 6002 of 
the AML Act to add the following additional purposes of the BSA: To 
prevent the laundering of money and the financing of terrorism 
through the establishment by financial institutions of reasonably 
designed risk-based programs to combat money laundering and the 
financing of terrorism; facilitate the tracking of money that has 
been sourced through criminal activity or is intended to promote 
criminal or terrorist activity; assess the money laundering, 
terrorism finance, tax evasion, and fraud risks to financial 
institutions, products, or services to protect the financial system 
of the United States from criminal abuse; and safeguard the national 
security of the United States; and establish appropriate frameworks 
for information sharing among financial institutions, their agents 
and service providers, their regulatory authorities, associations of 
financial institutions, the Department of the Treasury, and law 
enforcement authorities to identify, stop, and apprehend money 
launderers and those who finance terrorists.
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    Under the BSA, the Secretary may require any financial institution, 
including ``persons involved in real estate closings and settlements,'' 
to report any suspicious transaction relevant to a possible violation 
of law or regulation (a ``suspicious activity report,'' or 
``SAR'').\23\ The BSA also requires each financial institution to 
establish AML/CFT programs, including, at a minimum, ``(A) the 
development of internal policies, procedures, and controls; (B) the 
designation of a compliance officer; (C) an ongoing employee training 
program; and (D) an independent audit function to test programs.'' \24\ 
The Secretary may prescribe minimum standards for such programs, and 
may exempt any financial institution from the application of such 
standards.\25\ Under the BSA, as amended by Section 6102(c) of the AML 
Act, the Secretary is also authorized to ``require a class of domestic 
financial institutions or nonfinancial trades or businesses to maintain 
appropriate procedures, including the collection and reporting of 
certain information as the Secretary of the Treasury may prescribe by 
regulation, to . . . guard against money laundering, the financing of 
terrorism, or other forms of illicit finance.'' \26\
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    \23\ 31 U.S.C. 5318(g), 5312(a)(2)(U).
    \24\ 31 U.S.C. 5318(h)(1)(A)-(D).
    \25\ 31 U.S.C. 5318(h)(2)(A), 5318(a)(6). Public Law 107-56, 
Title III, Sec. 352(c), 115 Stat. 322 (Oct. 26, 2001); 31 U.S.C. 
5318(h)(2)(B)(i)-(iii).
    \26\ 31 U.S.C. 5318(a)(2) (as amended by Section 6102(c) of the 
AML Act).
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    FinCEN's regulations implementing the BSA require banks, non-bank 
residential mortgage lenders and originators (``RMLOs''), and housing-
related Government Sponsored Enterprises (``GSEs'') to file SARs and 
establish AML/CFT programs,\27\ but FinCEN's regulations exempt other 
persons involved in real estate closings and settlements from the 
requirement to establish AML/CFT programs, and the regulations do not 
impose a SAR filing requirement on such persons.\28\
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    \27\ 31 CFR parts 1020, 1029, 1030.
    \28\ 31 CFR 1010.205(b)(1)(v).
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IV. Prior Rulemakings

    In 2002, FinCEN temporarily exempted certain financial 
institutions, including ``persons involved in real estate closings and 
settlements'' and ``loan and finance companies,'' from the requirement 
to establish an AML/CFT program. FinCEN explained that it would 
``continue studying the money laundering risks posed by these 
institutions in order to develop appropriate anti-money laundering 
program requirements,'' but that additional time was needed to consider 
the businesses that would be subject to such requirements, as well as 
the nature and scope of the AML/CFT risks associated with those 
businesses.\29\ FinCEN also explained its concern that many of these 
financial institutions were sole proprietors or small businesses, and 
FinCEN intended to avoid imposing ``unreasonable regulatory burdens 
with little or no corresponding anti-money laundering benefits.'' \30\
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    \29\ 67 FR 21110-21112 (Apr. 29, 2002). FinCEN initially 
exempted persons involved in closings and settlements for six 
months, and then subsequently extended the temporary exemption 
indefinitely. 67 FR 67547 (Nov. 6, 2002).
    \30\ Id.
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    In 2003, FinCEN issued an ANPRM regarding the AML/CFT program

[[Page 69593]]

requirement for ``persons involved in real estate closings and 
settlements'' (``2003 ANPRM''). The 2003 ANPRM solicited comments on 
the money laundering risks in real estate closings and settlements, how 
to define ``persons involved in real estate closings and settlements,'' 
whether any persons involved in real estate closings and settlements 
should be exempted from the AML/CFT program requirement, and how to 
structure the requirement in light of the size, location, and 
activities of persons in the real estate industry.\31\ FinCEN received 
52 comments on the 2003 ANPRM from individuals, various institutions 
and associations of interested parties, law firms, state bar 
associations, an office within the Department of Justice (DOJ), and an 
office within the Internal Revenue Service (IRS).\32\ Many comments 
suggested that the threat of money laundering through real estate 
warranted appropriate regulation, but commenters disagreed over the 
specific businesses that should be covered. FinCEN did not propose 
regulations in response to these comments, and persons involved in real 
estate closings and settlements continue to be exempt from the AML/CFT 
program requirement.
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    \31\ 68 FR 17569 (Apr. 10, 2003).
    \32\ See FinCEN's website to review comments submitted, at 
https://www.fincen.gov/comments-advance-notice-proposed-rule-anti-money-laundering-programs-persons-involved-real-estate.
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    FinCEN subsequently focused on the money laundering vulnerabilities 
in financed real estate transactions, as approximately 80% of real 
estate transactions are financed by a loan from a financial 
institution.\33\ FinCEN published a number of reports tracking the rise 
of mortgage fraud SARs covering geographic trends and fraud typologies. 
These SARs, which were filed by banks and other financial institutions, 
underscored the illicit activity that can occur in the primary and 
secondary residential mortgage markets.\34\
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    \33\ The 80% coverage noted here is an estimate based on 
industry sources discussed below. See Note 45 infra.
    \34\ See, e.g., ``Mortgage Loan Fraud: An Industry Assessment 
Based on Suspicious Activity Report Analysis,'' Financial Crimes 
Enforcement Network (Nov. 2006); ``Suspicious Activity Related to 
Mortgage Loan Fraud,'' Financial Crimes Enforcement Network, 
Advisory, FIN-2012-A009 (Aug. 16, 2012).
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    In a 2012 final rule, FinCEN eliminated the exemption for ``loan 
and finance companies,'' and required such companies--defined as non-
bank residential mortgage lenders and originators (``RMLOs'')--to file 
SARs and comply with AML/CFT program obligations.\35\ In a 2014 final 
rule, FinCEN extended similar requirements to the housing-related 
Government Sponsored Enterprises (``GSEs'')--Fannie Mae, Freddie Mac, 
and the Federal Home Loan Banks.\36\ FinCEN explained that these 
entities were involved in providing financing to the residential 
mortgage market, making them vulnerable to fraud and other financial 
crimes.\37\ By purchasing mortgage loans, extending loans secured by 
mortgages and other real estate-related collateral, and engaging in a 
variety of related financial activities, these entities are in a unique 
position to provide information on suspected mortgage fraud and money 
laundering that has proven valuable to law enforcement and regulators 
in the investigation and prosecution of mortgage fraud and other 
financial crimes.\38\
---------------------------------------------------------------------------

    \35\ 77 FR 8148 (Feb. 14, 2012) (codified at 31 CFR part 1029).
    \36\ 79 FR 10365 (Feb. 25, 2014) (codified at 31 CFR part 1030).
    \37\ Id.
    \38\ Id.
---------------------------------------------------------------------------

    In a 2020 final rule, FinCEN also imposed additional AML/CFT 
obligations on banks lacking a federal functional regulator, ensuring 
that such entities would be subject to requirements to have an AML/CFT 
program, meet Customer Identification Program (CIP) and Customer Due 
Diligence (CDD) requirements, including the verification of beneficial 
owners of legal entity accounts, in addition to their existing SAR 
obligations (which would include reporting on transactions involving 
suspicious real estate transactions).\39\
---------------------------------------------------------------------------

    \39\ 85 FR 57129 (Sep. 15, 2020) (codified at 31 CFR 1020.210).
---------------------------------------------------------------------------

    Each of those regulations helped to ensure that many participants 
in financed real estate transactions were subject to AML/CFT program 
and reporting requirements, including to evaluate and protect against 
AML/CFT risks and identify and report suspicious activity.

V. Real Estate Geographic Targeting Orders

    FinCEN has taken a different approach to all-cash real estate 
transactions (i.e., real estate transactions without financing by a 
bank, RMLO, or GSE), which represent approximately 20% of real estate 
sales. When property is purchased without financing, the transaction 
generally does not involve a bank or other financial institution 
subject to AML/CFT program requirements. Instead, all-cash real estate 
transactions may involve only relatively small businesses or 
individuals involved in closing and settlement, and the participants 
may lack financial incentives to closely monitor the nature of the 
transactions. Consequently, there exists a vulnerability that illicit 
actors can exploit to launder the proceeds of criminal activity by 
purchasing real estate through all-cash transactions.
    In addition, all-cash real estate transactions in which individuals 
use shell companies to purchase high-value residential real estate, 
primarily in certain large U.S. cities, are a particular concern. 
FinCEN identified money laundering typologies associated with such 
transactions and uncovered numerous specific examples of all-cash 
purchases of residential real estate that potentially involved money 
laundering activities.\40\
---------------------------------------------------------------------------

    \40\ See, e.g., ``Advisory to Financial Institutions and Real 
Estate Firms and Professionals,'' Financial Crimes Enforcement 
Network, FIN-2017-A003 (Aug. 22, 2017).
---------------------------------------------------------------------------

    According to the NAR and the U.S. Census Bureau,\41\ in 2020, 5.64 
million existing residential homes and 822,000 new homes were sold in 
the United States, for a total of 6.46 million transactions.\42\ It is 
projected that existing and new home sales will total 5.88 million and 
740,000, respectively, in 2021.\43\ With a median sale price of

[[Page 69594]]

approximately $350,000 for both new and existing homes as of July 
2021,\44\ the total value of U.S. residential real estate sales is 
expected to exceed approximately $2.31 trillion in 2021.
---------------------------------------------------------------------------

    \41\ Statistics regarding residential real estate transactions 
are normally divided between new and existing home sales. Generally, 
the Census Bureau tracks new home sales, while the most accurate 
data for existing home sales is generated by NAR. Existing home 
sales constitute approximately 90% of the residential real estate 
transaction market. See ``New Home Sales vs. Existing Home Sales,'' 
U.S. Census Bureau, https://www.census.gov/construction/nrs/newvsexisting.html.
    \42\ ``Quick Real Estate Statistics,'' National Association of 
Realtors (Nov. 11, 2020), https://www.nar.realtor/research-and-statistics/quick-real-estate-statistics; ``Existing-Home Sales 
Recede 2.0% in August,'' National Association of Realtors (Sep. 22, 
2021), https://www.nar.realtor/newsroom/existing-home-sales-recede-2-0-in-august; ``Summary of August 2021 Existing Home Sales 
Statistics,'' National Association of Realtors (Sep. 22, 2021); 
Lawrence Yun, ``2021 International Transactions in U.S. Residential 
Real Estate,'' National Association of Realtors (Jul. 21, 2021), 
https://cdn.nar.realtor/sites/default/files/documents/2021-07-26-nar-real-estate-forecast-summit-international-transactions-in-us-residential-real-estate-lawrence-yun-presentation-slides-07-26-2021.pdf; ``New Houses Sold by Sales Price: United States (Q1),'' 
U.S. Census Bureau (2021), https://www.census.gov/construction/nrs/pdf/quarterlysales.pdf.
    \43\ ``Existing-Home Sales Recede 2.0% in August,'' National 
Association of Realtors (Sep. 22, 2021), https://www.nar.realtor/newsroom/existing-home-sales-recede-2-0-in-august; ``Summary of 
August 2021 Existing Home Sales Statistics,'' National Association 
of Realtors (Sep. 22, 2021); Lawrence Yun, ``2021 International 
Transactions in U.S. Residential Real Estate,'' National Association 
of Realtors (Jul. 21, 2021), https://cdn.nar.realtor/sites/default/files/documents/2021-07-26-nar-real-estate-forecast-summit-international-transactions-in-us-residential-real-estate-lawrence-yun-presentation-slides-07-26-2021.pdf; ``Monthly New Residential 
Sales,'' U.S. Census Bureau, Release CB21-155 (Sep. 24, 2021), 
https://www.census.gov/construction/nrs/pdf/newressales.pdf.
    \44\ ``Existing-Home Sales Climb 2.0% in July,'' National 
Association of Realtors, (Aug. 23, 2021), https://www.nar.realtor/newsroom/existing-home-sales-climb-2-0-in-july; ``Monthly New 
Residential Sales, August 2021,'' U.S. Census Bureau, Release CB21-
155 (Sep. 24, 2021), https://www.census.gov/construction/nrs/pdf/newressales.pdf; see also ``Summary of August 2021 Existing Home 
Sales Statistics,'' National Association of Realtors (Sep. 22, 
2021), https://cdn.nar.realtor/sites/default/files/documents/ehs-08-2021-summary-2021-09-22.pdf.
---------------------------------------------------------------------------

    Although a significant portion of those residential real estate 
transactions are financed by regulated RMLOs, GSEs, and depository 
institutions, non-financed real estate transactions can largely avoid 
financial institutions that are subject to AML/CFT requirements. As 
previously noted, other businesses and professions involved in real 
estate transactions, such as real estate brokers and agents, title 
company representatives, and closing agents (including attorneys when 
involved), currently are not subject to AML/CFT reporting obligations, 
and some of these, such as title insurance and real estate agents, are 
not mandatory in many transactions.
    According to figures published by NAR, in both 2020 and 2021, 
approximately 19% of existing residential home sale were non-financed 
transactions.\45\ The Census Bureau has further estimated that 
approximately 4.4% of new home sales are non-financed transactions.\46\ 
Given that existing home sales comprise approximately 90% of the 
residential real estate market in the United States, FinCEN estimates 
that the all-cash purchase rate of real estate transactions in the 
United States is approximately 18.5%. Based on the NAR estimates of 
total home sales and median sale prices, this means that approximately 
1.21 million residential real estate transactions, with an approximate 
value of $463 billion, likely proceed without any AML reporting 
obligations.\47\
---------------------------------------------------------------------------

    \45\ Lawrence Yun, ``2021 International Transactions in U.S. 
Residential Real Estate,'' National Association of Realtors (Jul. 
21, 2021), https://cdn.nar.realtor/sites/default/files/documents/2021-07-26-nar-real-estate-forecast-summit-international-transactions-in-us-residential-real-estate-lawrence-yun-presentation-slides-07-26-2021.pdf.
    \46\ ``New Houses Sold by Type of Financing (Table Q7),'' U.S. 
Census Bureau (2021), https://www.census.gov/construction/nrs/pdf/quarterlysales.pdf.
    \47\ Other businesses in the real estate industry have estimated 
even higher rates of non-financed transactions. For instance, 
Redfin, a nationwide real estate brokerage, reported that 30% of 
home sales were all-cash transactions between January and April 
2021. ``Share of Homes Bought With All Cash Hits 30% for First Time 
Since 2014,'' Redfin.com (Jul. 15, 2021), https://www.redfin.com/news/all-cash-home-purchases-2021/; see also ``Buying a house? 
Here's where all-cash deals are most competitive,'' CNBC.com (Dec. 
12, 2020), https://www.cnbc.com/2020/12/11/buying-a-house-heres-where-all-cash-deals-are-most-competitive.html (reporting that 
Realtor.com, a nationwide real estate listing website, indicated 
that 36 percent of home sales in the U.S. were non-financed). 
Accordingly, the use of the NAR and Census Bureau estimates are 
therefore conservative, and if anything, the scope of the money 
laundering vulnerability they create is much worse.
---------------------------------------------------------------------------

    The types of AML/CFT vulnerabilities in these reports led FinCEN to 
begin issuing Geographic Targeting Orders (GTOs) in January 2016 
(``Real Estate GTOs''). The Real Estate GTOs required title insurance 
companies to file reports and maintain records concerning all-cash 
purchases of residential real estate above a certain threshold in 
select metropolitan areas of the United States. Under 31 U.S.C. 5326, 
FinCEN may issue such GTOs that impose additional reporting or 
recordkeeping requirements on financial institutions and nonfinancial 
trades or businesses in a geographic area for a limited period of time, 
if FinCEN has reasonable grounds to conclude that such requirements are 
necessary to carry out the purposes of the BSA or to prevent evasions 
thereof.\48\ The Real Estate GTOs initially required some of the 
largest title insurance companies in the United States to report 
``beneficial ownership'' \49\ information on ``legal entities'' \50\ 
used to purchase ``residential real property'' \51\ in Manhattan and 
Miami in ``Covered Transactions''.\52\ The information that the GTOs 
required the title insurance companies to report included: (i) 
Information about the transaction, including the price and address of 
the real estate purchased; and (ii) beneficial ownership information--
such as name, social security number, and ID number and type--for the 
beneficial owners of certain legal entities purchasing property in 
Covered Transactions. The responsibility for reporting information to 
FinCEN was placed on title insurance companies because the title 
insurance industry is concentrated among a limited number of 
participants and title insurance companies play a central role in the 
vast majority of real estate transactions. This allowed FinCEN to 
streamline implementation of the GTOs and the collection of 
information.\53\
---------------------------------------------------------------------------

    \48\ See 31 U.S.C. 5326; 86 FR 62914 (Nov. 15, 2021).
    \49\ For the GTO, ``beneficial owner'' has been defined as an 
individual who, directly, or indirectly, owns 25 percent or more of 
the equity interests of the legal entity that purchased the 
residential property. For the purposes of this ANPRM the term 
``beneficial owner'' refers to that term as defined in the Real 
Estate GTOs and not the term as defined by the Corporate 
Transparency Act, Title LXIV of the AML Act.
    \50\ For the purposes of the 2016 Real Estate GTO, ``legal 
entity'' meant a corporation, limited liability company, 
partnership, or other similar business entity, whether formed under 
the laws of a state or of the United States or a foreign 
jurisdiction. In later Real Estate GTOs, FinCEN excluded from the 
definition of legal entity any entity for which the shares are 
publicly traded on a U.S. stock exchange.
    \51\ For purposes of the Real Estate GTOs, ``residential real 
property'' means real property (including individual units of 
condominiums and cooperatives) designed principally for the 
occupancy of from one to four families.
    \52\ Here, ``Covered Transaction'' means a transaction 
reportable under the GTO. The 2016 GTO defined Covered Transactions 
as transactions involving a covered business where: (i) A legal 
entity; (ii) purchased residential real property; (iii) located in 
the Borough of Manhattan in NY, or Miami-Dade County in Florida; 
(iv) for a total purchase price of $1,000,000 or more in Miami, or 
$3,000,000 or more in Manhattan; (v) the purchase was made without a 
bank loan or other similar financing; and (vi) the purchase was 
made, at least in part, using a monetary instrument (e.g., a 
cashier's check, currency or a money order). Later Real Estate GTOs 
changed the parameters of Covered Transactions to include new 
geographic areas, modify the reporting threshold, and cover 
additional payment methods.
    \53\ Such reports were made to FinCEN by submitting existing BSA 
reporting forms. Initially title insurances companies reported GTO 
information to FinCEN via FinCEN Form 8300 (Report of Cash Payments 
Over $10,000 Received in a Trade or Business). Later iterations of 
the Real Estate GTO required the GTO information to be reported via 
FinCEN Form 104 (Currency Transaction Report).
---------------------------------------------------------------------------

    The Real Estate GTOs issued in 2016 provided FinCEN and law 
enforcement with new data that connected non-financed residential 
property purchases with the individuals who were the beneficial owners 
of the legal entities making those purchases. FinCEN began to receive 
feedback from law enforcement partners that the information was useful 
for generating new investigative leads, identifying new subjects in 
ongoing cases, and informing forfeiture efforts, among other things. To 
further understand the links between opaque transactions and 
individuals engaged in potentially illicit activity, and to give law 
enforcement more time to analyze and use the newly collected data, 
FinCEN renewed the initial GTOs and included additional metropolitan 
areas.
    Since 2016, and most recently in October 2021, FinCEN has renewed 
the Real Estate GTOs multiple times (collectively, the Real Estate GTO 
program) and made modifications to their terms to address perceived 
gaps in the data collected. The number of

[[Page 69595]]

covered jurisdictions has expanded from two to nine metropolitan 
areas,\54\ and the orders now cover all U.S. title insurance companies 
operating in those areas. Subsequent GTO renewals have expanded the 
types of reportable all-cash transactions to include those involving 
additional monetary instruments, such as personal and business checks, 
and those involving wire transfers.\55\ Over the course of the Real 
Estate GTO program, FinCEN lowered the reporting transaction threshold 
from $3 million to $300,000 in order to better understand the risks of 
transactions in the non-luxury market.\56\ Lastly, real estate 
transactions involving purchases by publicly traded companies have been 
exempted.\57\
---------------------------------------------------------------------------

    \54\ These areas are: (1) The Texas counties of Bexar (includes 
San Antonio), Tarrant, and Dallas; (2) the Florida counties of 
Miami-Dade, Broward, and Palm Beach; (3) all New York City boroughs: 
Brooklyn, Queens, Bronx, Staten Island, and Manhattan; (4) the 
California counties of San Diego, Los Angeles, San Francisco, San 
Mateo, and Santa Clara; (5) the City and County of Honolulu in 
Hawaii; (6) the Nevada county of Clark (includes Las Vegas); (7) the 
Washington county of King (includes Seattle); (8) the Massachusetts 
counties of Suffolk and Middlesex (includes Boston and Cambridge, 
respectively); and (9) the Illinois county of Cook (includes 
Chicago).
    \55\ This expansion of the GTOs to cover wire transfers was 
authorized by the Countering America's Adversaries through Sanctions 
Act (``CAATSA''), Public Law 115-44 (Aug. 2, 2017) (codified at 31 
U.S.C. 5326).
    \56\ FinCEN found that money laundering risks existed at lower 
price thresholds, and thus the current GTO set a $300,000 threshold 
for all covered jurisdictions.
    \57\ FinCEN concluded that the beneficial owners of real estate 
purchases by publicly traded companies are identifiable through 
other regulatory filings.
---------------------------------------------------------------------------

    Evidence of money laundering via U.S. real estate transactions has 
increased over the last several decades, including during the period 
when the Real Estate GTO program has been in place. FinCEN understands 
from various law enforcement agencies that the Real Estate GTO data has 
been highly useful to the investigation of money laundering and 
financial crimes.
    In evaluating reporting from the Real Estate GTOs issued since 
2016, FinCEN and law enforcement agencies believe that a substantial 
proportion of the reported transactions for the purchase of property 
involved a beneficial owner who was also the subject of a SAR.\58\ For 
example, a FinCEN advisory published in May 2017 stated that the 
proportion of such overlap was more than 30%.\59\ In other words, a 
significant number of the beneficial owners of the legal entities 
engaged in non-financed real estate purchases reported under the GTOs 
have a nexus to reported suspicious activity. The overlap between 
subjects of GTO reports and SARs suggests a link between all-cash 
purchases of residential real estate and individuals determined by 
financial institutions to have been engaged in suspicious activity. 
These connections between Real Estate GTO reports and other illicit 
activity have proven highly useful for FinCEN and law enforcement in 
identifying patterns of criminal activity and links between various 
illicit enterprises to support investigations.
---------------------------------------------------------------------------

    \58\ Notably, during the GTO program, independent of any GTO 
reports, SARs filed by banks related to suspected money laundering 
in residential real estate transactions increased.
    \59\ See ``Advisory to Financial Institutions and Real Estate 
Firms and Professionals,'' Financial Crimes Enforcement Network, 
FIN-2017-A003, p. 5 (Aug. 22, 2017).
---------------------------------------------------------------------------

    Law enforcement input and actions further indicate that residential 
real estate presents significant money laundering risk. Federal and 
State law enforcement agencies have informed FinCEN that both SARs and 
GTO reports related to real estate transactions have provided greater 
insight regarding assets held by persons of investigative interest, 
have resulted in asset forfeiture actions, and have helped generate 
leads and identify new subjects for investigation. Additionally, beyond 
the investigations that have been described above, a review of 
complaints, indictments, and prosecuted cases provides numerous 
examples of the linkages between real estate transactions and money 
laundering, as well as other illicit activities.\60\ Accordingly, the 
usefulness of the Real Estate GTO reporting data to law enforcement 
suggests that a regulatory requirement to ensure consistent reporting 
on a nationwide basis would facilitate law enforcement and national 
security agency efforts to combat illicit activity in this sector.\61\
---------------------------------------------------------------------------

    \60\ See Note 3 supra.
    \61\ Moreover, one study found that the Real Estate GTOs had the 
added ameliorative effect of decreasing anonymous capital flows into 
the U.S. housing markets, thereby lessening the overall likelihood 
of BSA evasion via the real estate sector. See Hundtofte, C. Sean 
and Rantala, Ville, ``Anonymous Capital Flows and U.S. Housing 
Markets,'' University of Miami Business School, p. 23 (May 28, 
2018); see also Nicholas Nehemas & Rene Rodriguez, ``How dirty is 
Miami Real Estate? Secret home deals dried up when feds starting 
watching,'' Miami Herald (Jul. 18 2018), https://www.miamiherald.com/news/business/real-estate-news/article213797269.html.
---------------------------------------------------------------------------

VI. Commercial Real Estate

    In contrast to FinCEN's use of Real Estate GTOs to focus on all-
cash transactions involving residential real estate, FinCEN decided at 
the time not to impose a reporting requirement on all cash commercial 
real estate transactions. The commercial real estate market is both 
more diverse and complicated than the residential real estate market 
and presents unique challenges to applying the same reporting 
requirements or methods as residential transactions. In commercial real 
estate, possible payments structures are more complex than in the 
residential real estate market. For example, while the line between 
financed and non-financed transactions is relatively well-defined in 
the residential real estate market, this is not necessarily the case 
with commercial real estate transactions. An entity may, for example, 
finance the purchase of a large commercial property via the issuance of 
bonds. It is unclear whether such a transaction would be viewed to be a 
cash transaction from the point of view of the entities required to 
report such a transaction. A commercial real estate ``transaction'' may 
also involve many transactions. In some cases, such as the development 
of a large commercial real estate project, there may be many 
transactions involved in the development and conveyance of a commercial 
real estate property over the course of months or years.
    In part due to such added complexity and opacity, the risks and 
vulnerabilities associated with the residential real estate sector 
covered by the GTOs may be compounded in transactions involving 
commercial real estate, as there are additional types of purchasing 
options and financing arrangements available for parties seeking to 
build or acquire property worth up to hundreds of millions of 
dollars.\62\ Lawyers, accountants, and individuals in the private 
equity fields--all positions with minimal to no AML/CFT obligations 
under the BSA--often facilitate commercial real estate transactions, 
working at different stages of the transaction and operating with 
differing amounts of beneficial ownership and financial information 
related to buyers and sellers. Commercial real estate transactions also 
often involve purpose-built legal entities and indirect ownership 
chains as parties create tailored corporate entities to acquire or 
invest in a manner that limits their legal liability and financial 
exposure.\63\ The result is an opaque field full of diverse foreign and 
U.S. domiciled legal entities associated with transactions worth 
hundreds of millions

[[Page 69596]]

of dollars that makes up one of the United States' most lucrative 
industries.
---------------------------------------------------------------------------

    \62\ ``COVID-19 and the Future of Commercial Real Estate 
Finance,'' Congressional Research Service (Oct. 19, 2020).
    \63\ See generally Douglas E. Cornelius, Esq. Goodwin Procter 
LLP, John P. O'Neill, Esq. Holland & Knight, LLP, ``Closing 
Commercial Real Estate Transactions,'' (May 9, 1995).
---------------------------------------------------------------------------

    Broadly speaking, FinCEN has serious concerns with the money 
laundering risks associated with the commercial real estate sector. In 
its 2006 and 2011 reports, FinCEN detailed various types of suspicious 
transactions indicative of money laundering in the commercial real 
estate industry. In the 2006 report, FinCEN analyzed a random sampling 
of SARs involving commercial real estate-related transactions in which 
the SAR narratives described transactions or activities involving 
suspected money laundering and related illicit activity. The types of 
illicit activity found in that analysis included: Structuring, money 
laundering, international transfers, tax evasion, and other illicit 
activity. Among the report's key findings, FinCEN found that property 
management, real estate investment, realty, and real estate development 
companies were the most commonly reported entities associated with 
commercial real estate-related money laundering. The most suspicious 
activity highlighted in the report was money laundering to promote tax 
evasion. The report further noted that there appeared to be an 
increasing trend towards using commercial real estate-related accounts 
to launder money for PEPs.\64\ In the 2011 report, which focused on 
commercial real estate financing fraud, FinCEN found that SAR filings 
involving such fraud almost tripled between 2007 and 2010. FinCEN's 
analysis found that the top four reported fraud categories were: False 
documents, misappropriation of funds, collusion-bank insider, and false 
statements.\65\
---------------------------------------------------------------------------

    \64\ See generally ``FinCEN Sees Growth in Suspected Money 
Laundering in Commercial Real Estate Industry,'' Financial Crimes 
Enforcement Network (Dec. 05, 2006).
    \65\ See ``Commercial Real Estate Financing Fraud: Suspicious 
Activity Reports by Depository Institutions from January 1, 2007-
December 31, 2010,'' Financial Crimes Enforcement Network, p. 1 
(Mar. 2011).
---------------------------------------------------------------------------

    In 2018, the National Money Laundering Risk Assessment noted the 
vulnerability of commercial real estate to illicit activity, 
highlighting a 2013 case involving the laundering of drug proceeds by a 
real estate agent through real estate, including commercial 
properties.\66\ More recently, DOJ actions have demonstrated that 
vulnerabilities associated with the commercial real estate sector are 
actively being exploited by criminals to launder a significant amount 
of funds. DOJ actions have exposed, for example, drug trafficking 
organizations funneling illicit proceeds into an investment firm and 
then using the proceeds to invest in commercial real estate 
ventures,\67\ and corrupt Russian officials and organized crime figures 
defrauding the Russian Treasury and then transferring the fraud 
proceeds through shell corporations into Manhattan commercial real 
estate.\68\
---------------------------------------------------------------------------

    \66\ ``National Money Laundering Risk Assessment,'' p. 38 
(2018).
    \67\ ``Justice Department Seeks Forfeiture of Third Commercial 
Property Purchased with Funds Misappropriated from PrivatBank in 
Ukraine,'' Press Release, Department of Justice (Dec. 30, 2020), 
https://www.justice.gov/opa/pr/justice-department-seeks-forfeiture-third-commercial-property-purchased-funds-misappropriated; U.S. v. 
Real Property at 7505 and 7171 Forest Lane, Dallas, Texas 75230, 
Case No. 1:20-cv-23278, Doc. 1 (S.D. Fl. Aug. 6, 2020).
    \68\ ``Acting Manhattan U.S. Attorney Announces $5.9 Million 
Settlement of Civil Money Laundering and Forfeiture Claims Against 
Real Estate Corporations Alleged to Have Laundered Proceeds of 
Russian Tax Fraud,'' Press Release, Department of Justice (May 12, 
2017), https://www.justice.gov/usao-sdny/pr/acting-manhattan-us-attorney-announces-59-million-settlement-civil-money-laundering-and.
---------------------------------------------------------------------------

    Finally, in August 2021, the NGO GFI reported that based on its 
review of 125 cases from the United States, United Kingdom, and Canada 
involving real estate money laundering, more than 30% of the cases 
involved commercial real estate and those cases generally involved 
significantly higher property values than the residential real estate 
cases studied.\69\
---------------------------------------------------------------------------

    \69\ ``New Report Finds U.S. Real Estate Sector a Safe Haven for 
Money Laundering,'' Press Release, Global Financial Integrity (Aug. 
9, 2021), https://gfintegrity.org/press-release/new-report-finds-u-s-real-estate-sector-a-safe-haven-for-money-laundering/.
---------------------------------------------------------------------------

    In sum, while the Real Estate GTOs to date have not included 
commercial real estate transactions, FinCEN invites comments on the 
money laundering risks and structure of the commercial real estate 
sector so that it may proactively consider possible next steps with 
respect to reporting or other requirements in relation to commercial 
real estate transactions given the demonstrated vulnerability of the 
commercial real estate industry to exploitation. FinCEN is particularly 
interested in comment concerning the volume and/or type of money 
laundering vulnerabilities associated with commercial and with 
residential real estate, and any unique factors or complexities 
regarding non-financed transactions in each segment, to enable FinCEN 
to assess appropriate regulatory treatment for residential and 
commercial real estate purchases.

VII. Real Estate Purchases by Natural Persons

    FinCEN recognizes the potential for non-financed purchases by 
natural persons to facilitate money laundering and other illicit 
activity. Indeed, the use of natural person nominees can facilitate 
money laundering involving domestic and foreign bribery and corruption 
schemes, sanctions evasion, tax evasion, drug trafficking, and fraud, 
among other types of offenses. As highlighted in the 2020 National 
Strategy for Combating Terrorist and Other Illicit Financing, a 
Treasury assessment of federal cases involving real properties 
forfeited to DOJ's Assets Forfeiture Fund between 2014 and June 2017 
that were valued at over $150,000 identified that, in addition to the 
use of complicit professionals and misuse of legal entities, 
``criminals often attempted to conceal the true ownership of property 
by using nominee purchasers or title holders.'' \70\ These individuals 
were sometimes another member of the criminal organization but were 
often a family member or personal associate of the criminal.'' \71\ 
FinCEN is considering the extent to which these risks can be addressed. 
Accordingly, FinCEN solicits comments on money laundering risks 
associated with non-financed real estate transactions conducted by 
natural persons, the extent to which rules that apply to entities 
(which may still be involved in transactions by natural persons) would 
address those risks, and whether additional regulatory or statutory 
measures should be considered to close remaining gaps with regard to 
natural persons associated with real estate transactions.
---------------------------------------------------------------------------

    \70\ ``National Strategy for Combatting Terrorist and Other 
Illicit Financing,'' pp. 17-18 (2020).
    \71\ Id.
---------------------------------------------------------------------------

VIII. Scope of Potential Rules

    Given the vulnerabilities of the U.S. real estate sector to money 
laundering and other illicit activities, FinCEN believes that 
additional regulatory steps may be needed to ensure consistent 
reporting on a nationwide basis.
    FinCEN therefore invites comment through this ANPRM on appropriate 
regulatory frameworks to do so, including possible nationwide 
recordkeeping and reporting requirements pursuant to 31 U.S.C. 
5318(a)(2) or other potential mechanisms. FinCEN believes that any 
proposed regulation should require certain persons to collect, report, 
and retain information about specified non-financed purchases of real 
estate. FinCEN is considering proposing such a rule that would apply 
throughout the United States and would contain no lower reporting 
dollar threshold.

[[Page 69597]]

A. Nature of Recordkeeping and Reporting Requirements

    As explained above, FinCEN's existing regulations require banks, 
RMLOs, and GSEs to comply with the BSA's general recordkeeping and 
reporting requirements, including the requirement to file SARs and to 
establish AML/CFT programs. In contrast, FinCEN's GTOs have subjected 
title insurance companies in the non-financed real estate market to a 
more specific reporting requirement applicable to all covered 
transactions. FinCEN seeks comment on promulgating a similar specific 
reporting requirement, either as an alternative or addition to the 
BSA's general requirements. Such a specific reporting requirement could 
be imposed under 31 U.S.C. 5318(a)(2), as amended by Section 6102(a) of 
the AML Act, which authorizes the Secretary to ``require a class of 
domestic financial institutions . . . to maintain appropriate 
procedures, including the collection and reporting of certain 
information as the Secretary of the Treasury may prescribe by 
regulation, to . . . guard against money laundering, the financing of 
terrorism, or other forms of illicit finance.'' A specific reporting 
requirement issued under this authority may be an appropriately 
tailored way to increase the transparency of the non-financed sector of 
the real estate market and provide law enforcement, national security 
agencies, and financial institutions with highly useful information
    In the alternative, FinCEN could promulgate more general 
requirements for certain persons involved in non-financed real estate 
closings and settlements by requiring such persons to file SARs 
pursuant to FinCEN's authority under 31 U.S.C. 5318(g)(1) and by 
requiring them to establish AML/CFT programs under 31 U.S.C. 
5318(h)(1)-(2). Such an approach would involve the application of AML/
CFT program rules that traditionally include four requirements--
adoption of AML/CFT policies and procedures, designation of an AML/CFT 
compliance officer, establishment of an AML/CFT training program for 
appropriate employees, and independent testing of the program to ensure 
compliance.\72\ FinCEN seeks comments on how such requirements, as well 
the fifth requirement, CDD rules \73\ containing beneficial ownership 
requirements, would affect the real estate industry.\74\ In evaluating 
any potential imposition of general AML/CFT requirements, FinCEN must 
consider the extent to which the standards for AML/CFT programs are 
commensurate with the size, location, and activities of persons in this 
industry. Accordingly, FinCEN is especially interested in comments that 
would allow it to consider such factors. FinCEN is also particularly 
interested in the costs, burdens, and benefits associated with the 
implementation of AML/CFT programs, SAR reporting, and other FinCEN 
regulatory requirements. Commenters are urged to address the ability of 
various real estate-related businesses to gather this information for 
greater transactional transparency, as well as to support the effective 
administration of a SAR reporting program.
---------------------------------------------------------------------------

    \72\ See, e.g., ``Rules for Loan or Finance Companies,'' 31 CFR 
1029.210.
    \73\ 81 FR 29398 (May 11, 2016) (codified at 31 CFR 1010.230 and 
other sections in chapter X). For certain categories of financial 
institutions, FinCEN has included explicit requirements to conduct 
customer due diligence and to identify and verify the identity of 
beneficial owners of legal entity customers, subject to certain 
exclusions and conditions. See generally id.
    \74\ See generally 86 FR 17557 (Apr. 5, 2021).
---------------------------------------------------------------------------

    FinCEN seeks comment on the approach that would most effectively 
address money laundering concerns and minimize burdens for persons 
involved in non-financed real estate transactions.

B. Scope of Persons Subject to a Reporting Requirement

    FinCEN seeks comment on which persons should be required to collect 
information, maintain records, and report information regarding non-
financed purchases of real estate. Thus far, the Real Estate GTOs have 
required reporting from title insurance companies. However, title 
insurance is not mandatory in every jurisdiction within the United 
States, and declining to purchase title insurance could enable evasion 
of a reporting requirement limited to title insurance companies. FinCEN 
therefore seeks comment on whether there are other persons involved in 
non-financed real estate closings and settlements who should be 
considered.
    Typical closing transactions may involve several participants, 
performing distinct, but complementary, functions, in addition to the 
buyer and seller. A typical real estate transaction, for example, may 
involve real estate brokers and agents (representing sellers and 
buyers); one or more attorneys who represent the buyer or the seller; a 
title or title insurance company representative, which may include an 
attorney; a closing agent (title or escrow); an appraiser, who may 
assess the value of the real estate; and an inspector to identify code 
violations and needed repairs before closing.
    Certain transaction participants may also be better positioned than 
others to understand the nature and purpose of the transaction, the 
source of funds, and the identity of the buyer, particularly natural 
persons or the beneficial owners behind any legal entity purchaser. 
Other transaction participants may have greater importance to the 
successful completion of a transaction or face different incentives, 
which may suggest that they could be well-positioned and motivated to 
identify owners behind legal entities in the transaction.
    In addition, the participants and the nature of their involvement 
can vary depending on a variety of factors, including state and local 
laws, the contemplated use of the real estate, the location of the 
property, the location and nationality of the buyer, the nature of the 
rights to be acquired, and how such rights are to be held or 
transferred upon resale of the property or via terms of an investor 
agreement. Real estate may also be held directly, through one or more 
shell holding companies, through trusts, or through other investment 
vehicles. Real estate may be acquired for a number of purposes, 
including residential or commercial use, portfolio investment, or 
development purposes, among other reasons. As to the nature of the 
rights to be acquired, the real estate may be held in fee simple, under 
a lease agreement, or as security for indebtedness. In addition, real 
estate transactions can involve the transfer of title, legal ownership, 
or equitable ownership, or a combination thereof. Each of the variables 
may influence the participants involved in such real estate 
transactions.
    Real estate professionals may have different roles in different 
transactions that affect their exposure to money laundering. Some 
professionals may be directly involved in marketing and structuring a 
real estate deal and are thus able to identify all relevant parties to 
the transaction. Other participants may have business roles that may 
not be customer-facing or may focus specifically on the details of the 
property without any knowledge of the financing (or lack thereof), and 
therefore are not in a position to identify parties for recordkeeping 
and reporting purposes. Finally, it may be relevant to identify those 
financial institutions or nonfinancial trades or businesses that are 
primarily involved in the transfer and presentation of purchase funds 
in exchange for title or other rights.
    To address money laundering concerns, it may be necessary to ensure 
that a recordkeeping and reporting

[[Page 69598]]

requirement attaches to some entity involved in every non-financed 
transaction. At the same time, FinCEN seeks to minimize the burden on 
reporting entities and to avoid unnecessary and duplicative reporting. 
FinCEN seeks comments on whether to assign a hierarchical, cascading 
reporting obligation on different entities depending on which are 
involved in a particular covered transaction, in a manner similar to 
the IRS's regulation for submitting Form 1099-S (``Proceeds from Real 
Estate Transactions'').\75\ For that IRS regulation, the ``person 
responsible for closing the transaction,'' which may be a settlement 
agent or attorney, for instance, depending on the nature of the 
transaction, is required to file the Form 1099-S. And if there is no 
``person responsible for closing the transaction,'' the reporting 
requirement then falls to other persons involved in the transaction, 
such as the purchaser's broker. In that way, the IRS regulation ensures 
that for every transaction, some entity involved is required to report. 
FinCEN is considering, and invites comments on, such an approach. 
FinCEN also solicits comments on whether and how to assign a reporting 
requirement to any or all of the following entities: Title insurance 
companies, title or escrow companies, real estate agents or brokers, 
real estate attorneys or law firms, settlement or closing agents, as 
well as other entities listed below in the comments section.
---------------------------------------------------------------------------

    \75\ See 26 CFR 1.6045-4 (Information reporting on real estate 
transactions with dates of closing on or after January 1, 1991).
---------------------------------------------------------------------------

    FinCEN also invites comments on any additional financial 
institutions or nonfinancial trades or businesses that should be 
covered by a proposed regulation. Finally, FinCEN is aware that there 
are substantial differences in practices, customs, and requirements for 
real estate transactions in different jurisdictions within the United 
States and invites comment on those differences and how to best design 
a rule that takes into account such jurisdictional differences.

C. Geographic Scope and Transaction Threshold

    Although the Real Estate GTOs have been targeted at particular 
geographic locations within the United States, FinCEN's preliminary 
view is that fully addressing the money laundering vulnerabilities in 
the real estate market requires a nationwide rule. While money 
laundering activity in real estate transactions may be more common in 
some areas than others, it can occur in any location. Indeed, a survey 
of recent state and federal court indictments and prosecuted cases 
demonstrates that real estate money laundering is not limited to the 
jurisdictions covered by the Real Estate GTOs.\76\ Because such 
activity can occur in any location, limiting the scope of the 
regulations by geography may simply push money laundering activity into 
other locations. A uniform national requirement would also provide 
consistency and predictability to businesses required to maintain 
records and make reports. FinCEN nevertheless invites comment on the 
geographic reach of any proposed regulation, whether the geographic 
coverage should be limited, and any underlying information to support 
such limitations. Commenters are invited to comment particularly on the 
differences in practices, customs, and requirements for real estate 
transactions in geographic areas of the United States that merit 
specific consideration because of their relevance to the potential for 
the abuse of real estate transactions by money launderers.
---------------------------------------------------------------------------

    \76\ See, e.g., United States v. Real Property Located in 
Potomac, Maryland, Commonly Known as 9908 Bentcross Drive, Potomac, 
MD 20854, Case No. 20-cv-02071, Doc. 1 (D. Md. Jul. 15, 2020) 
(purchase of property in Potomac, MD); United States v. Raul Torres, 
Case No. 1:19CR390, Doc. 30 (N.D. Ohio Mar. 30, 2020) (purchase of 
multiple properties in Cleveland, OH); United States v. Bradley, No. 
3:15-cr-00037-2, 2019 U.S. Dist. LEXIS 141157 (M.D. Tenn. Aug. 20, 
2019) (purchase of multiple properties in Wayne County, MI); United 
States v. Coffman, 859 F. Supp. 2d 871 (E.D. Ky. 2012) (purchases of 
properties in Kentucky and South Carolina); United States v. Paul 
Manafort, Case 1:18-cr-00083-TSE, Doc. 14 (E.D. Va. Feb. 26, 2018) 
(purchase of a property in Virginia); United States v. Miller, 295 
F. Supp. 3d 690 (E.D. Va. 2018) (purchase of properties in Virginia 
and Delaware); Atty. Griev. Comm'n of Md. v. Blair, 188 A.3d 1009 
(MD Ct. App. 2018) (purchase of properties in Washington, DC and 
Maryland); United States v. Patrick Ifediba, et al., Case No. 2:18-
cr-00103-RDP-JEO, Doc. 1 (N.D. Ala. Mar. 29, 2018) (purchase of 
multiple properties in Alabama); United States v. Delgado, 653 F.3d 
729 (8th Cir. 2011) (purchase of multiple properties in Kansas City, 
MO), United States v. Fernandez, 559 F.3d 303 (5th Cir. 2009) 
(purchase of multiple properties in El Paso, TX); United States v. 
10.10 Acres Located on Squires Rd., 386 F. Supp. 2d 613 (M.D.N.C. 
2005) (purchase of two properties in North Carolina); State v. 
Harris, 861 A.2d 165 (Super. Ct. App. Div. 2004) (purchase of 
multiple properties in a non-GTO-covered jurisdiction in New 
Jersey); see also Lakshmi Kumar & Kaisa de Bel, ``Acres of Money 
Laundering: Why U.S. Real Estate is a Kleptocrat's Dream,'' Global 
Financial Integrity, p. 29 (Aug. 2021) (highlighting money 
laundering cases outside of jurisdictions covered by the Real Estate 
GTOs).
---------------------------------------------------------------------------

    FinCEN also welcomes comment on the appropriate transaction 
threshold, if any, for a reporting requirement. FinCEN's GTOs contain a 
$300,000 threshold. Other BSA reporting requirements have other 
thresholds.\77\ However, any transaction threshold may enable money 
launderers to structure their behavior to avoid a reporting 
requirement. A survey of court cases indicates that real estate used in 
money laundering is not limited to properties that sell for greater 
than $300,000, the current GTO threshold.\78\ For these reasons, FinCEN 
is considering a reporting requirement with no transaction threshold. 
According to figures published by NAR, existing residential home sales 
of less than $100,000 constitute less than 5% of overall sales.\79\ 
Therefore, not setting a minimum threshold appears unlikely to 
substantially increase the burden on entities required to report under 
any future regulation. FinCEN solicits comments, however, on whether a 
minimum threshold should be included.
---------------------------------------------------------------------------

    \77\ See, e.g., 31 U.S.C. 5316(a)(1)(requirement to report 
importing or exporting monetary instruments of more than $10,000 at 
one time); 31 CFR 1010.330(a)(requirement to report receipt of 
currency in excess of $10,000 in the course of trade or business).
    \78\ See, e.g., United States v. Bradley, No. 3:15-cr-00037-2, 
2019 U.S. Dist. LEXIS 141157 (M.D. Tenn. Aug. 20, 2019) (multiple 
transactions under $10,000); Atty. Griev. Comm'n of Md. v. Blair, 
188 A.3d 1009 (MD Ct. App. 2018) (several transactions under 
$20,000); United States v. Coffman, 859 F. Supp. 2d 871 (E.D. Ky. 
2012) (purchases of property for under $150,000); United States v. 
Delgado, 653 F.3d 729 (8th Cir. 2011) (multiple transactions under 
$100,000); United States v. 10.10 Acres Located on Squires Rd., 386 
F. Supp. 2d 613 (M.D.N.C. 2005) (transaction under $50,000).
    \79\ ``Summary of August 2021 Existing Home Sales Statistics,'' 
National Association of Realtors (Sep. 22, 2021).
---------------------------------------------------------------------------

D. Purchases by Certain Entities

    Under the Real Estate GTOs, only cash purchases by the following 
``legal entities'' are reportable transactions: ``a corporation, 
limited liability company, partnership or other similar business 
entity, whether formed under the laws of a state, or of the United 
States, or a foreign jurisdiction, other than a business whose common 
stock or analogous equity interests are listed on a securities exchange 
regulated by the Securities and Exchange Commission (``SEC'') or a 
self-regulatory organization registered with the SEC, or an entity 
solely owned by such a business.'' Given the known money laundering 
typology of using shell companies to obscure the ultimate owners of 
real estate, FinCEN believes these entities should likely be covered in 
any proposed regulation. FinCEN seeks comment on which ``legal 
entities'' should be included.
    Additionally, FinCEN seeks specific comment on whether to include 
trusts--broadly defined as a legal ``relationship in which one person 
holds title to property, subject to an obligation to keep or use the 
property for the benefit of another''--within the reporting

[[Page 69599]]

requirement.\80\ FinCEN notes that recent high profile DOJ enforcement 
actions, including a forfeiture action to recover an alleged $3.5 
million in corrupt proceeds laundered through the purchase of a 
Potomac, Maryland, mansion via a trust, indicate that consideration of 
any proposed rule should also include the risks presented by U.S. and 
foreign trusts.\81\
---------------------------------------------------------------------------

    \80\ ``Definition of Trust,'' Internal Revenue Service, https://www.irs.gov/charities-non-profits/definition-of-a-trust.
    \81\ See United States v. Real Property Located in Potomac, 
Maryland, Commonly Known as 9908 Bentcross Drive, Potomac, MD 20854, 
Case No. 20-cv-02071, Doc. 1 (D. Md. Jul. 15, 2020).
---------------------------------------------------------------------------

    Due to the inherent opacity of purchases by legal entities, the 
Real Estate GTOs focused on purchases by such entities. However, FinCEN 
is also concerned about real estate money laundering risks involving 
natural persons, such as the use of nominees or ``straw-man'' 
purchasers. FinCEN is thus considering the extent to which any proposed 
rule should address this issue. FinCEN is particularly interested in 
comments broadly addressing the most appropriate way to treat natural 
persons in regulations addressing money laundering in the real estate 
sector. Moreover, FinCEN seeks views on how the use of natural persons 
in money laundering schemes could be addressed by potential rules 
covering entities (which may still be involved in most transactions by 
natural persons).

E. Type of Real Estate

    FinCEN is considering the best approach to extending reporting 
requirements or other regulatory treatment to both residential and 
commercial real estate given the important differences between the 
residential and commercial real estate markets. FinCEN is especially 
interested in how such a regulation might be structured to address the 
differences between commercial and residential real estate transactions 
and whether the risk in non-residential real estate is sufficient to 
justify the burdens that a reporting requirement for non-residential 
real estate could impose. FinCEN also invites comments on whether to 
address both commercial and residential real estate sectors in the same 
rule or to take an iterative approach.

IX. Request for Comment

    FinCEN seeks comments on the questions listed below, but invites 
any other relevant comments as well. FinCEN encourages commenters to 
reference specific question numbers to facilitate FinCEN's review of 
comments.

A. General Information Regarding the Real Estate Market

    FinCEN is issuing this ANPRM to solicit public comment on issues 
pertaining to potential BSA recordkeeping and reporting requirements. 
FinCEN invites the views of real estate businesses and professionals, 
trade organizations, law enforcement, federal agencies, state, local, 
and Tribal governments, NGOs, members of civil society, and any other 
interested parties. A variety of perspectives on the U.S. real estate 
market will provide FinCEN with the information essential for any 
future rulemaking.
    1. Describe a typical residential real estate transaction.
    2. Describe a typical commercial real estate transaction.
    3. What are the products, services, activities, or affiliations 
associated with residential real estate transactions? Commercial real 
estate transactions?
    4. What percentage of residential real estate transactions involve 
purchases by legal entities or trusts?
    5. What kinds of professionals are most common in real estate 
transactions, such as real estate brokers, settlement agents, title 
insurers, attorneys, etc.? Does this differ for residential and 
commercial real estate? What kinds of professionals or participants are 
most able to request, verify, and report documentation related to 
purchasers? Is title insurance required in most of the transactions? If 
not, how common is the use of title insurance?
    6. What are the typical transaction costs to close a residential 
real estate deal? For commercial real estate? Typically, what 
percentage of the sale price do these costs represent?
    7. What sort of due diligence is normally conducted, before or at 
closing, regarding (i) the parties to a transaction (particularly of 
any natural persons who are the beneficial owners of the buyer or 
seller); (ii) the source of funds for any transaction; and (iii) other 
key aspects of the transaction? Does this process differ for commercial 
and residential transactions?
    8. What sort of existing recordkeeping or reporting requirements, 
unrelated to BSA compliance, exist for real estate transactions? If so, 
what information must be recorded or reported, to whom, for how long, 
and what entity provides oversight and ensures compliance? Do these 
requirements differ for residential and commercial real estate 
transactions?
    9. Please describe any ``best practices'' related to due diligence 
on the seller and buyer of residential or commercial real estate; 
confirmation of the legality of the transaction; inquiries as to the 
source of acquisition funding; and any other issues that may relate to 
the marketing, negotiation of terms, and closing of the transaction.
    10. What percentage of residential real estate purchases are all-
cash transactions?
    11. What percentage of commercial real estate purchases are all-
cash transactions?
    12. Are the beneficial owners of legal entity purchasers involved 
in real estate transactions normally identified by some participant in 
a real estate transaction?
    13. How do due diligence processes, if any, differ for commercial 
or residential properties?
    14. What do persons involved in real estate transactions do if they 
have any suspicions about a transaction, customer, or source of funds?
    15. How often are attorneys used in all-cash residential or 
commercial real estate transactions? Why are they used?
    16. How often are real estate brokers or agents used in all-cash 
residential real estate transactions? Why are they used?
    17. Is the decision to use real estate brokers, or agents, or 
attorneys different for all-cash real estate transactions?
    18. Please describe when an escrow account must be used for a real 
estate transaction.
    19. Please explain how payment is most often tendered for real 
estate purchases (e.g., mortgage, domestic wires, foreign wires, 
checks, currency, CVC). Which of these categories of payment are 
higher-risk?
    20. Please note any differences not already covered in provision of 
services for residential real estate transactions versus those for 
commercial real estate transactions.

B. What are the money laundering risks in real estate transactions?

    FinCEN solicits comment on money laundering activities (in general 
terms, not identifying actual parties or properties involved) in 
connection with real estate transactions, the existence of any 
safeguards in the sector to prevent money laundering, and what 
additional steps may be necessary to protect the real estate industry 
from abuse by money launderers.
    21. Describe the potential money laundering and illicit finance 
risks and vulnerabilities arising in the U.S. real estate market. Are 
these risks different for the residential and commercial real estate 
sectors?
    22. Identify specific activities and services that present the 
highest and

[[Page 69600]]

lowest money laundering risks, as well as factors related to parties, 
the transaction, and the property, bearing on risk and its assessment. 
What kinds of transactions and customers are highest and lowest risk? 
How are those risks mitigated and what are the associated costs of that 
mitigation?
    23. What are the money laundering risks associated with all-cash 
purchases of real estate by natural persons?
    24. Is it possible to estimate the extent to which residential 
property values are affected by money laundering transactions? Is there 
a similar estimate for commercial real estate?
    25. What are the money laundering risks of commercial versus 
residential transactions?

C. Which real estate transactions should FinCEN's rule cover?

    The questions in Part IX, Sections C-E, may be most relevant for 
any proposed rule imposing a specific reporting requirement pursuant to 
31 U.S.C. 5318(a)(2), as amended by Section 6102(c)of the AML Act, but 
commenters may examine these questions in the context of a proposed 
rule promulgating traditional AML/CFT requirements for ``persons 
involved in real estate closings and settlements.''
    26. What general factors should FinCEN consider in determining 
which transactions to cover?
    27. Should FinCEN's proposed rule be limited to residential real 
estate or should FinCEN cover transactions involving other forms of 
real estate (e.g., commercial, farmland). If you believe FinCEN should 
cover other forms of real estate, should FinCEN do so in conjunction 
with the regulation of residential real estate transactions or 
separately?
    28. How should FinCEN define ``residential real estate''? Is the 
definition used for the Real Estate GTOs either under- or over-
inclusive?
    29. How should FinCEN define ``commercial real estate''?
    30. Should FinCEN's proposed rule be limited to transactions 
involving legal entities or should it cover natural persons as well? If 
not, why?
    31. Assuming FinCEN's proposed rule is limited to purchases by 
legal entities, which legal entities should any rule cover? Is the 
definition of ``legal entity'' in the Real Estate GTOs too broad or too 
narrow? Should trusts be covered?
    32. Should FinCEN's proposed rule be limited to non-financed 
transactions (all-cash)?
    33. Assuming FinCEN's proposed rule is limited to non-financed 
transactions, how should FinCEN define the term ``non-financed 
transaction''?
    34. Should FinCEN geographically limit the scope of any proposed 
regulation?
    35. Are there any jurisdictions or geographic areas within the 
United States in which residential real estate transactions have unique 
customs or requirements that would make designing a rule to cover such 
jurisdictions in conjunction with the remainder of the country 
problematic?
    36. Should FinCEN provide a lower limit or de minimis amount for 
the reporting threshold for transactions?

D. Which persons should be required to report information concerning 
real estate transactions to FinCEN?

    37. Should FinCEN require any, a subset, or all of the following 
entities to report information regarding non-financed transactions: (i) 
Real estate lawyers and law firms; (ii) real estate agents/brokers/
settlement agents; (iii) title insurance companies; (iv) title and 
escrow agents and companies; (v) real estate investment companies; (vi) 
real estate development companies; (vii) real estate property 
management companies; (viii) real estate auctions houses; (ix) 
investment advisers; (x) private money lenders; and (xi) money service 
businesses?
    38. Which financial institutions and nonfinancial trades and 
businesses are in a position to ascertain and report: (i) The identity 
of the legal entity or legal arrangement purchaser of the real estate; 
(ii) the natural person(s) who are the direct or indirect owners of the 
legal entity or arrangement purchaser; (iii) the specific details of 
the transactions (e.g., date of sale, location of property, sale price, 
and any other terms or conditions); (iv) the source of funds; (v) the 
form of payments (e.g., wire transfer, check, currency, etc.); (vi) the 
purpose of the transaction; (vii) the intended use of the proceeds of a 
sale; and (viii) the businesses involved in the transfer of funds?
    39. What are the potential benefits and costs of promulgating a 
transaction reporting requirement that covered real estate brokers and 
agents, title agencies and/or insurance companies, or attorneys? What 
burden (quantify if possible) would it places on such entities?
    40. What would be the best way to assign reporting requirements to 
ensure a reporting requirement falls on at least one financial 
institution or nonfinancial trade or business for every non-financed 
transaction by a legal entity purchaser?
    41. Should FinCEN require reports from multiple financial 
institutions or nonfinancial trades or businesses involved in a non-
financed purchase of residential real estate, or should FinCEN propose 
a reporting requirement via a cascading hierarchy based on the types of 
entities involved in a particular transaction, as is the case for IRS 
Form 1099-S? \82\
---------------------------------------------------------------------------

    \82\ See generally 26 CFR 1.6045-4.
---------------------------------------------------------------------------

    42. What should FinCEN consider when assigning the reporting burden 
with respect to potential evasion of the reporting requirements?

E. What information should FinCEN require regarding real estate 
transactions covered by a proposed regulation?

    43. What information should FinCEN require to be reported regarding 
the legal entity (or if applicable, natural person) purchasing real 
estate in a covered transaction?
    44. Should FinCEN require information about the seller? If so, what 
information should FinCEN require regarding the seller?
    45. What information should FinCEN require about the financial 
institution or nonfinancial trade or business reporting the transaction 
to FinCEN?
    46. What information should FinCEN require regarding the real 
estate underlying the transaction?
    47. Should FinCEN require information regarding the source of funds 
used to purchase real estate?
    48. How can FinCEN craft the information required to avoid overly 
burdensome or duplicative reporting requirements?
    49. How should FinCEN require reports under any potential 
regulation be filed? Should FinCEN utilize an existing BSA form or 
develop a new reporting form for any proposed regulation?

F. What are the potential burdens or implementation costs of a 
potential FinCEN regulation?

    50. What would be the costs, burdens, and benefits associated with 
collecting, storing, and reporting real estate transactional 
information to FinCEN?
    51. How would FinCEN's regulatory requirements be integrated into 
your current compliance program?
    52. How much time will you need to successfully integrate these 
requirements into your current systems and procedures?
    53. Estimate the initial projected cost of implementation and the 
projected long-term support costs for ongoing program maintenance. Do 
you anticipate being able to integrate implementation costs into your 
existing compliance-related budget?
    54. Would certain financial institutions or nonfinancial trades or

[[Page 69601]]

businesses incur higher costs compared to others? Why?
    55. If program or other requirements were limited to purchases 
above a certain price threshold, how would this affect: (i) The burden 
of implementing such potential rules; and (ii) the utility of such 
potential rules for addressing money laundering issues in the real 
estate market?
    56. What are the key benefits for a particular stakeholder (e.g., a 
business, if the commenter is a business), if any, assuming issuance of 
the rules?
    57. Are there alternative methods you believe FinCEN should 
consider as part of the overall rulemaking process that would 
effectively address the risk of money laundering in the all-cash real 
estate market? Please describe in detail.
    58. What would be the costs, burdens, and benefits associated with 
requiring a new form that would report key elements of information 
deemed highly significant by FinCEN?
    59. Please list any legislative, regulatory, judicial, corporate, 
or market-related developments that have transpired since FinCEN issued 
the 2003 ANPRM that you view as relevant to FinCEN's current proposed 
issuance of AML regulations.

G. Should FinCEN promulgate general AML/CFT recordkeeping and reporting 
requirements for ``persons involved in real estate closings and 
settlements''?

    As explained above, FinCEN is considering promulgating a specific 
reporting requirement under 31 U.S.C. 5318(a)(2), as amended by Section 
6102(c) of the AML Act, and the questions in Part XI, Sections C-E 
relate to such a requirement. The following questions for comment are 
generally intended to collect information about a potential rule that 
would instead apply traditional AML/CFT requirements to ``persons 
involved in real estate closings and settlements'' in lieu of a more 
specific requirement.
    60. How should the term ``persons involved in real estate closings 
and settlements'' be defined?
    61. What general factors should FinCEN consider in determining the 
scope of such a rule? That is, what businesses involved in residential 
or commercial real estate transactions should be required to comply 
with any potential rules, and what businesses should be excluded? What 
kinds of transactions, if any, should be excluded?
    62. What are the potential benefits and costs to including real 
estate brokers and agents, title agencies and/or insurance companies, 
or real estate attorneys in the definition of ``persons involved in 
real estate closings or settlements''?
    63. Describe any requirements that FinCEN could promulgate that 
adequately address these risks apart from typical AML/CFT programs, 
recordkeeping, and reporting obligations.
    64. Describe your views on whether typical customer identification 
and verification, AML, SAR, and CTR rules would appropriately address 
risks in the real estate market and what burden they would entail. What 
specific factors or characteristics in your business model would 
justify deviating from the typical AML/CFT program, recordkeeping, and 
reporting obligations?
    65. What are the benefits and drawbacks of a new form requirement 
to file key information deemed important by FinCEN versus full AML/CFT 
program requirements? Which would be better and why?
    66. Are there particular concerns that smaller businesses may have 
regarding the implementation of an AML/CFT program?
    67. Please describe any programs that persons involved in real 
estate closings and settlements may already have in place to meet 
existing legal obligations, in addition to the requirement to report on 
Form 8300 the receipt of over $10,000 in currency and certain monetary 
instruments. In addition, detail your views on any voluntary best 
practices or guidelines you adopted to prevent money laundering, fraud 
or other financial crimes, the effectiveness of those programs, and 
whether any such practices should be integrated into any AML/CFT or SAR 
rules.
    68. Do you think it is appropriate for customer identification and 
verification requirements to be applied to persons purchasing and 
selling real estate? Would such requirements lead to a change in your 
business practices?
    69. Please detail any aspects of possible FinCEN rules that may 
cause your business to operate at a competitive disadvantage compared 
to any businesses that offer similar services, if such businesses would 
be outside the scope of any FinCEN rules.
    70. Should due diligence requirements, if any, apply equally with 
respect to buyers and sellers or should only buyers be included? Should 
it apply to all or should only certain types of buyers and sellers 
included?
    71. Should AML/CFT programmatic requirements, if any, apply to 
residential transactions, commercial transactions, or both?
    72. Should the rules be structured to require collection of 
information about only the most vulnerable or high-risk transactions? 
If so, how could FinCEN minimize the burdens of such a requirement?
    73. Should FinCEN implement information collection requirements 
only for transactions meeting a specified cost or value threshold? 
Should other criteria or standards be included to trigger such 
collection requirements?
    74. How might such a rule impact your business? What benefits, 
costs, and burdens does the commenter anticipate if all the AML/CFT 
requirements in the CDD rules are incorporated into any proposed rules?
    75. Assuming FinCEN proposes to issue traditional AML requirements, 
please describe the major impacts the business expects upon issuance of 
final rules. What specific requirements in these regulations do you 
expect may have the greatest impact on your operations?
    76. Assuming FinCEN proposed to issue a new form requirement, what 
information should be included, to what AML/CFT benefit, and would the 
ability to mitigate or prevent money laundering risk in the industry be 
reduced when compared to implementing traditional AML/CFT requirements?
    77. How would FinCEN's regulatory requirements be integrated into 
your business' current compliance program?
    78. How much time would a covered business need to successfully 
integrate AML/CFT requirements into current systems and procedures?
    79. Estimate the initial projected cost of implementation, and the 
projected long-term support costs for ongoing program maintenance. Do 
you anticipate being able to integrate or share implementation costs 
into your existing compliance-related budget?
    80. Would certain businesses incur higher costs compared to others? 
Why?
    81. If program or other requirements were limited to purchases 
above a certain price threshold, how would this impact: (i) The burden 
of implementing such potential rules; and (ii) the utility of such 
potential rules for addressing money laundering issues in the real 
estate market?
    82. What are the key benefits for your business, if any, assuming 
issuance of the rules?

X. Regulatory Planning and Review

    This advance notice of proposed rulemaking is a substantive, non-
significant regulatory action under Executive Order 12866 and has not 
been reviewed by the Office of Management and Budget.

[[Page 69602]]

XI. Conclusion

    With this ANPRM, FinCEN seeks input on the questions set forth 
above. FinCEN welcomes comments on all aspects of the ANPRM, and all 
interested parties are encouraged to provide their views.

    By the Department of the Treasury.

    Dated: December 2, 2021.
Himamauli Das,
Acting Director, Financial Crimes Enforcement Network.
[FR Doc. 2021-26549 Filed 12-7-21; 8:45 am]
BILLING CODE 4810-02-P