Report Focuses on Anonymity, Real Estate Transactions and Complicit Lawyers

Report Also Signals Upcoming AML Regulation for Certain Niche Institutions

Second Post in a Two-Post Series

In its 2020 National Strategy for Combating Terrorist and Other Illicit Financing (“2020 Strategy”), the U.S. Department of Treasury (“Treasury”) has laid out its AML and money laundering enforcement priorities. Last week, we blogged about the 2020 Strategy and focused on the document’s findings and recommendations for increased transparency into beneficial ownership; strengthening international regulation and coordination, and modernization of the BSA/AML regime in regards to technological innovation.

Here, we focus on the 2020 Strategy as it relates to combating money laundering relating to real estate transactions and gatekeeper professions in general, such as lawyers, real estate professionals and other financial professionals, including broker dealers. Importantly, the 2020 Strategy also notes that the Financial Crimes Enforcement Network (“FinCEN”) is working on a proposed regulation which would extend AML obligations for banks and other financial institutions not subject to a federal functional regulator; there are an estimated 669 such institutions in the U.S.
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First in a Two-Post Series

The U.S. Department of Treasury (“Treasury”) has issued its 2020 National Strategy for Combating Terrorist and Other Illicit Financing (“2020 Strategy”). This document sets forth the key priorities of the U.S. government regarding enforcement of the Bank Secretary Act (“BSA”), and the furthering of the government’s Anti-Money-Laundering (“AML”) and Combating the Financing of Terrorism (“CFT”) goals in general. It is lengthy document addressing numerous issues – albeit in a relatively high-level fashion in regards to any specific issue.

In this post, we will summarize the findings and recommendations of the 2020 Strategy, and will highlight some topics this blog has followed closely – including calls for: increased transparency into beneficial ownership; strengthening international regulation and coordination, and modernization of the AML/BSA regime. Our next post will focus on the 2020 Strategy as it relates to combating money laundering relating to real estate transactions and “gatekeeper” professions, such as lawyers, real estate professionals and other financial professionals, including broker-dealers.

The 2020 Strategy also focuses on several other important issues which we will not discuss in this limited blog series, but on which we certainly have blogged before, including the role of money laundering in international trade, casinos, money services businesses and digital assets.
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Last Wednesday, FinCEN Deputy Director Jamal El-Hindi appeared at the annual conference of the Money Transmitter Regulators Association and delivered prepared remarks. The topics of his address covered three issues of continuing interest: (i) innovation and reform with respect to implementation of the Bank Secrecy Act (BSA); (ii) FinCEN supervision of non-banking financial institutions; and (iii) maintaining a strong culture of compliance.
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Relief is Narrow, but FinCEN’s Explanation of Low Money Laundering Risk Posed by Lending Products is Instructive

On May 11, the Financial Crimes Enforcement Network (“FinCEN”) issued a ruling to provide exceptive relief from the application of the new Beneficial Ownership rule (the “BO Rule,” about which we repeatedly have blogged: see here, here and here) to premium finance lending products that allow for cash refunds.

Very generally, the BO Rule — effective as of May 11, 2018 — requires covered financial institutions to identify and verify the identity of the beneficial owner of legal entity customers at account opening. One exemption provided by the BO Rule from its requirements is when a legal entity customer opens a new account for the purpose of financing insurance premiums and the payments are remitted directly by the financial institution to the insurance provider or broker.  However, this exemption does not apply when there is a possibility of cash refunds.

In its May 11th ruling, FinCEN granted exceptive relief from the BO Rule to premium finance lenders whose payments are remitted directly to the insurance provider or broker, even if the lending involves the potential for a cash refund.  Although this exception is narrow when compared to the many other financial institutions covered by the broad BO Rule, FinCEN’s explanation for why the excepted entities present a low risk for money laundering is potentially instructive in other contexts, such as risk assessments undertaken by financial institutions for the purposes of their anti-money laundering (“AML”) compliance programs.
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2016 was a busy year for developments in Anti-Money Laundering (AML), the Bank Secrecy Act (BSA), the criminal money laundering statutes, forfeiture, and related issues. In part one of our year-in-review, we discuss six key topics:

  • The Panama Papers and its spotlight on the United States as a potential money laundering haven

In January 2016, FinCEN issued two geographic targeting orders (GTOs) aimed at combating money laundering in all-cash real estate transactions in the Borough of Manhattan, New York, and Miami-Dade County, Florida—two areas identified by FinCEN as having “a higher than average percentage of all-cash transactions.” The GTOs, which took effect in March 2016, required certain title insurance companies to identify the natural persons behind entities using cash to purchase high-end real estate—properties with a sales price of more than $1 million in Miami-Dade County and more than $3 million in Manhattan.

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The December 2016 FATF Mutual Evaluation Report on the United States’ Measures to Combat Money Laundering and Terrorist Financing repeatedly highlighted the need for U.S. regulators and the real estate industry to do more to address money laundering and terrorist financing risks.

The FATF report identified “high-end real estate” transactions as an area needing priority action. In the report, the FATF assessors recommend that FinCEN take further action after analyzing the outcomes from FinCEN’s 2016 GTOs for high-end cash transactions in several U.S. real markets.


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FinCEN assessed two significant AML-related civil money penalties in 2016 against a bank and credit union. First, FinCEN and the Office of the Comptroller of the Currency announced a combined $4 million civil money penalty against Gibraltar Private Bank and Trust Company for allegedly willfully violating the AML requirements of the BSA. According to FinCEN,