Meanwhile, Congress Wants a Report on Russian Money Laundering and Its Relationship to the Real Estate Industry

FinCEN announced today that, once again, it is extending the Geographic Targeting Order, or GTO, regarding real estate transactions.

FinCEN’s press release is here.  The new GTO is here.  It is identical to the most recently issued GTO.  FinCEN has issued FAQs on the GTOs here.  This is a topic on which we previously have blogged extensively.

As we previously have observed, the constant renewals of the real estate GTOs — first initiated in January 2016  — appear to represent an inevitable march towards the issuance of regulations under the Bank Secrecy Act regarding real estate transactions.  The government is analyzing information obtained through the GTOs and using the data not only for initiating and assisting investigations, but presumably also to build a case for permanent regulations applicable to the real estate industry.  To this latter end, a new statute, the Combating Russian Money Laundering Act, passed in conjunction with the Anti-Money Laundering Act of 2020, likely will assist this effort.  The statute in part requires the Secretary of the Treasury to submit by the end of 2021 to the U.S. House of Representatives and Senate a report that “shall identify any additional regulations, statutory changes, enhanced due diligence, and reporting requirements that are necessary to better identify, prevent, and combat money laundering linked to Russia,” including steps related to (1) “strengthening current, or enacting new, reporting requirements and customer due diligence requirements for the real estate sector, law firms, and other trust and corporate service providers[,]” and (2) “establishing a permanent solution to collecting information nationwide to track ownership of real estate.”

So although this report is nominally tied “only” to money laundering related to Russia, it almost surely will be applied to the real estate industry at large.  The report also must address issues involving the beneficial ownership of anonymous companies, and “enhanced know-your-customer procedures and screening for transactions involving Russian political leaders, Russian state-owned enterprises, and known Russian transnational organized crime figures.”

If you are generally interested in the convergence of real estate and money laundering issues, then please check out Ballard Spahr’s detailed chapter, The Intersection of Money Laundering and Real Estate, in Anti-Money Laundering Laws and Regulations 2020, a publication issued by International Comparative Legal Guides (ICLG).  If you would like to remain updated on these issues, please click here to subscribe to Money Laundering Watch. Please click here to find out about Ballard Spahr’s Anti-Money Laundering Team.