Quiero saber acerca de...

Federal Register / Vol. 86, No. 233 / Wednesday, December 8, 2021 / Proposed Rules 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.
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
In a 2012 final rule, FinCEN
eliminated the exemption for loan and finance companies, and required such companiesdefined as non-bank residential mortgage lenders and originators RMLOsto file SARs and comply with AML/CFT program 31 68

FR 17569 Apr. 10, 2003.
FinCENs website to review comments submitted, at https www.fincen.gov/commentsadvance-notice-proposed-rule-anti-moneylaundering-programs-persons-involved-real-estate.
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, FIN2012A009
Aug. 16, 2012.

jspears on DSK121TN23PROD with PROPOSALS1

32 See
VerDate Sep<11>2014

16:18 Dec 07, 2021

Jkt 256001

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 estaterelated 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
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
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 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.
39 85 FR 57129 Sep. 15, 2020 codified at 31 CFR
1020.210.

PO 00000

Frm 00007

Fmt 4702

Sfmt 4702

69593

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
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 40 See, e.g., Advisory to Financial Institutions and Real Estate Firms and Professionals, Financial Crimes Enforcement Network, FIN2017A003
Aug. 22, 2017.
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-realestate-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-forecastsummit-international-transactions-in-us-residentialreal-estate-lawrence-yun-presentation-slides-07-262021.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-homesales-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-

E:FRFM08DEP1.SGM

Continued
08DEP1