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Case Highlights Confidentiality of BSA Reporting and Continued Focus on Real Estate as Money Laundering Tool

The Northern District of California granted summary judgment to the Financial Crimes Enforcement Network (“FinCEN”) in a Freedom of Information Act (“FOIA”) case pertaining to an attempt by a group of investigative journalists to obtain information reported to FinCEN on the beneficial owners of high-end real estate.  This case clearly indicates that the Bank Secrecy Act (“BSA”) will continue to prevent efforts by journalists to seek, via FOIA, sensitive and protected information reported to FinCEN.  Of course, and as the world has witnessed, journalists still can turn to leaks and data hacks to obtain and distribute such information.  This case also reminds us that the use of real estate as a potential vehicle for money laundering remains a hot topic not only for regulators and enforcement personnel, but also for journalists and watchdog groups.

In The Center for Investigative Reporting, et al. v. United States Department of the Treasury, the Court held that FinCEN was not required to produce documents indicating the “real human owners” of residential real estate purchased with cash that had been requested by The Center for Investigative Reporting (“CIR”).  The Court’s ruling – affirming the confidentiality protections that are critical to the effectiveness of financial institution reporting under BSA – comes at pivotal moment, as journalistic agencies such as the International Consortium of Investigative Journalists (“ICIJ”) and BuzzFeed News reported less than six months ago on leaked documents referred to as the “FinCEN Files,” describing alleged transactions valued at over $2 trillion U.S. dollars and reported by financial institutions to FinCEN through Suspicious Activity Reports (“SARs”). Under the BSA, it is illegal to reveal the decision to file or not file a SAR to the subject of the SAR.  The ICIJ also played a key role in the release of the notorious Panama Papers, which detailed an alleged web of international money laundering and tax evasion obtained through a massive data leak.…
Continue Reading Investigative Journalists Lose FOIA Bid to Obtain GTO Info Reported to FinCEN

To the surprise of no one, FinCEN announced today that 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.  This is a topic on which we previously have blogged extensively.…

High Profile Corruption, High End Real Estate, Shell Companies . . . and Fine Art

Second of Two Posts on Evolving Issues Regarding Real Estate and Money Laundering

In our last post, we blogged on a major regulatory tool to combat the use of real estate as a potential vehicle for money laundering: the real estate Geographic Targeting Orders (“GTOs”) issued by the Financial Crimes Enforcement Network. Today we explore a major enforcement tool in action: civil forfeiture of real estate by the U.S. Department of Justice (“DOJ”).

This summer, the International Unit of the DOJ’s Money Laundering and Asset Recovery Section (MLARS) filed numerous complaints for civil forfeiture for real estate and other assets. This blog post will highlight a few – but not all – of these interesting and high-profile cases. Some of these cases may have been informed by data and leads obtained through the GTOs.

We explore here a trio of civil forfeiture actions pertaining, respectively, to alleged public corruption cases arising out of Gambia, Nigeria, and Malaysia. All of these cases involve foreign public officials who allegedly obtained wealth through corruption schemes committed abroad and laundered that money through shell companies to purchase real estate and other assets – sometimes located in the U.S., but sometimes not. Although the officials’ alleged initial crimes – the “specified unlawful activity,” or SUAs, as underlying crimes are defined under the federal money laundering statutes – took place overseas, the U.S. money laundering statutes provide that foreign misappropriation, embezzlements, and theft of public funds to benefit a public official constitute SUAs, thereby allowing the U.S. government to pursue civil forfeiture claims against assets located in the U.S. or abroad which are linked to the funds from underlying crimes committed primarily or even outside of the U.S.

This is the “civil forfeiture version” of a tactic used with increasing frequency by DOJ on which we repeatedly have blogged: the use of the criminal money laundering statutes to prosecute foreign officials for spending the fruits of entirely foreign crimes, when some of the financial transfers involved in the subsequent money laundering transactions occurred in the U.S.

Finally, another theme running throughout the allegations in these civil forfeiture actions is the unfortunate connection between money laundering and corruption and human rights abuses.…
Continue Reading Civil Forfeiture of Real Estate to Fight Money Laundering: A Round-Up

Law Enforcement Has Been Using GTO Data

First of Two Posts on Evolving Issues Regarding Real Estate and Money Laundering

The U.S. Government Accountability Office (“GAO”) has issued a report on the status and effectiveness of the Geographic Targeting Orders (“GTOs”) issued by the Financial Crimes Enforcement Network (“FinCEN”) since 2016, and on which we repeatedly have blogged.  The GAO’s report, entitled “Anti-Money Laundering — FinCEN Should Enhance Procedures for Implementing and Evaluating Geographic Targeting Orders,” (“the Report”) is lengthy.  In this post, we will describe the Report at a high level, and will attempt to focus on the portions which shed possible light on two key questions:  (1) how is law enforcement using the information culled from filings received by FinCEN as a result of the GTOs; and (2) whether the information obtained from GTO fillings may fuel legislation or regulations that will permanently subject portions of the real estate industry to anti-money laundering (“AML”) reporting requirements under the Bank Secrecy Act (“BSA”).

In our next post, we will turn from regulatory requirements to enforcement actions, and explore some recent high-profile civil forfeiture actions by the Department of Justice — at least some of which may have been fueled by information obtained through GTOs — involving real estate and alleged foreign corruption.  Under any scenario, these forfeiture actions confirm the U.S. government’s sustained focus on real estate as a mechanism for money laundering.…
Continue Reading GAO Publishes Report on Effectiveness of Real Estate GTOs Issued by FinCEN

We are very pleased to announce that we have published a 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).

Money laundering and anti-money laundering concerns relating to the real estate industry is a topic on which…

Recent DOJ Forfeiture Action Against High-End Real Estate in Notorious Corruption Scheme Underscores Issues 

We are pleased to be presenting on Money Laundering and the Real Estate Industry on May 20 before the Real Estate Services Providers Council (RESPRO), a national non-profit trade association representing businesses before federal and state policy makers, and…

As expected, on May 8, 2020, the Financial Crimes Enforcement Network (“FinCEN”) reissued its Geographic Targeting Orders (“GTOs”) requiring U.S. title insurance companies to identify the natural persons behind legal entities used in purchases of residential real estate performed without a bank loan or similar form of external financing.  The monetary threshold remains at $300,000,…

We are really pleased to be moderating the Practising Law Institute’s 2020 Anti-Money Laundering Conference on May 12, 2020, starting at 9 a.m. Perhaps needless to say, this year’s conference will be entirely virtual.  But the conference still should be as informative, interesting and timely as always.  Our conference co-chair, Nicole S. Healy of Ropers…

A Court Ruling that May Resonate Across the Globe

The High Court in London recently struck down three “Unexplained Wealth Orders” that U.K. law enforcement had hoped would foil an alleged money laundering scheme by Kazakh political elites. Instead, the Court found that the government’s evidence was insufficient to compel family members of the former Kazakh President to explain how they acquired approximately £80 million worth of property in the U.K.

The Court’s Order is detailed, and it carefully parses through some potentially eyebrow-raising facts regarding the players and properties embroiled in this saga. Ultimately, the primary point of contention between the Court and the U.K. enforcement authorities comes down to a very basic question in all global money laundering enforcement: if corporate structures are complex and potentially opaque, is that necessarily a strong sign of underlying illegality? Here, the Court seemed to answer that question in the negative. This appears to be a classic story of suspicion versus persuasive proof, and how that dynamic can play out in a court of law in a concrete dispute. This outcome, and the language used by the Court, likely will resonate for some time.…
Continue Reading U.K. Court Strikes Down “Unexplained Wealth Orders” By Parsing Facts and Making Value Judgments About Meaning of Corporate Complexity

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.…
Continue Reading Treasury Report Targets Money Laundering Risks in Real Estate and Gatekeeper Professions