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Federal Register / Vol. 86, No. 233 / Wednesday, December 8, 2021 / Proposed Rules
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.
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.
19 See generally Anti-Money Laundering Guidelines for Real Estate Professionals, https
www.nar.realtor/articles/anti-money-launderingguidelines-for-real-estate-professionals.

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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
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 20 The BSA is codified at 12 U.S.C. 1829b, 12
U.S.C. 19511960, 31 U.S.C. 53115314 and 5316
5336, and includes notes thereto, with implementing regulations at 31 CFR chapter X.
21 Treasury Order 18001 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.
23 31 U.S.C. 5318g, 5312a2U.
24 31 U.S.C. 5318h1AD.

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programs, and may exempt any financial institution from the application of such standards.25 Under the BSA, as amended by Section 6102c 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
FinCENs regulations implementing the BSA require banks, non-bank residential mortgage lenders and originators RMLOs, and housingrelated Government Sponsored Enterprises GSEs to file SARs and establish AML/CFT programs,27 but FinCENs 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
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
In 2003, FinCEN issued an ANPRM
regarding the AML/CFT program 25 31 U.S.C. 5318h2A, 5318a6. Public Law 10756, Title III, Sec. 352c, 115 Stat. 322 Oct. 26, 2001; 31 U.S.C. 5318h2Biiii.
26 31 U.S.C. 5318a2 as amended by Section 6102c of the AML Act.
27 31 CFR parts 1020, 1029, 1030.
28 31 CFR 1010.205b1v.
29 67 FR 2111021112 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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