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Federal Register / Vol. 86, No. 233 / Wednesday, December 8, 2021 / Proposed Rules
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of dollars that makes up one of the United States most lucrative industries.
Broadly speaking, FinCEN has serious concerns with the money laundering risks associated with the commercial real estate sector. In its 2006 and 2011
reports, FinCEN detailed various types of suspicious transactions indicative of money laundering in the commercial real estate industry. In the 2006 report, FinCEN analyzed a random sampling of SARs involving commercial real estaterelated transactions in which the SAR
narratives described transactions or activities involving suspected money laundering and related illicit activity.
The types of illicit activity found in that analysis included: Structuring, money laundering, international transfers, tax evasion, and other illicit activity.
Among the reports key findings, FinCEN found that property management, real estate investment, realty, and real estate development companies were the most commonly reported entities associated with commercial real estate-related money laundering. The most suspicious activity highlighted in the report was money laundering to promote tax evasion. The report further noted that there appeared to be an increasing trend towards using commercial real estaterelated accounts to launder money for PEPs.64 In the 2011 report, which focused on commercial real estate financing fraud, FinCEN found that SAR
filings involving such fraud almost tripled between 2007 and 2010.
FinCENs analysis found that the top four reported fraud categories were:
False documents, misappropriation of funds, collusion-bank insider, and false statements.65
In 2018, the National Money Laundering Risk Assessment noted the vulnerability of commercial real estate to illicit activity, highlighting a 2013
case involving the laundering of drug proceeds by a real estate agent through real estate, including commercial properties.66 More recently, DOJ actions have demonstrated that vulnerabilities associated with the commercial real estate sector are actively being exploited by criminals to launder a significant amount of funds. DOJ actions have exposed, for example, drug trafficking organizations funneling illicit proceeds 64 See generally FinCEN Sees Growth in Suspected Money Laundering in Commercial Real Estate Industry, Financial Crimes Enforcement Network Dec. 05, 2006.
65 See Commercial Real Estate Financing Fraud:
Suspicious Activity Reports by Depository Institutions from January 1, 2007December 31, 2010, Financial Crimes Enforcement Network, p.
1 Mar. 2011.
66 National Money Laundering Risk Assessment, p. 38 2018.

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into an investment firm and then using the proceeds to invest in commercial real estate ventures,67 and corrupt Russian officials and organized crime figures defrauding the Russian Treasury and then transferring the fraud proceeds through shell corporations into Manhattan commercial real estate.68
Finally, in August 2021, the NGO GFI
reported that based on its review of 125
cases from the United States, United Kingdom, and Canada involving real estate money laundering, more than 30% of the cases involved commercial real estate and those cases generally involved significantly higher property values than the residential real estate cases studied.69
In sum, while the Real Estate GTOs to date have not included commercial real estate transactions, FinCEN invites comments on the money laundering risks and structure of the commercial real estate sector so that it may proactively consider possible next steps with respect to reporting or other requirements in relation to commercial real estate transactions given the demonstrated vulnerability of the commercial real estate industry to exploitation. FinCEN is particularly interested in comment concerning the volume and/or type of money laundering vulnerabilities associated with commercial and with residential real estate, and any unique factors or complexities regarding non-financed transactions in each segment, to enable FinCEN to assess appropriate regulatory treatment for residential and commercial real estate purchases.

and other illicit activity. Indeed, the use of natural person nominees can facilitate money laundering involving domestic and foreign bribery and corruption schemes, sanctions evasion, tax evasion, drug trafficking, and fraud, among other types of offenses. As highlighted in the 2020 National Strategy for Combating Terrorist and Other Illicit Financing, a Treasury assessment of federal cases involving real properties forfeited to DOJs Assets Forfeiture Fund between 2014 and June 2017 that were valued at over $150,000
identified that, in addition to the use of complicit professionals and misuse of legal entities, criminals often attempted to conceal the true ownership of property by using nominee purchasers or title holders. 70 These individuals were sometimes another member of the criminal organization but were often a family member or personal associate of the criminal. 71 FinCEN is considering the extent to which these risks can be addressed. Accordingly, FinCEN solicits comments on money laundering risks associated with nonfinanced real estate transactions conducted by natural persons, the extent to which rules that apply to entities which may still be involved in transactions by natural persons would address those risks, and whether additional regulatory or statutory measures should be considered to close remaining gaps with regard to natural persons associated with real estate transactions.

VII. Real Estate Purchases by Natural Persons
Given the vulnerabilities of the U.S.
real estate sector to money laundering and other illicit activities, FinCEN
believes that additional regulatory steps may be needed to ensure consistent reporting on a nationwide basis.
FinCEN therefore invites comment through this ANPRM on appropriate regulatory frameworks to do so, including possible nationwide recordkeeping and reporting requirements pursuant to 31 U.S.C.
5318a2 or other potential mechanisms. FinCEN believes that any proposed regulation should require certain persons to collect, report, and retain information about specified nonfinanced purchases of real estate.
FinCEN is considering proposing such a rule that would apply throughout the United States and would contain no lower reporting dollar threshold.

FinCEN recognizes the potential for non-financed purchases by natural persons to facilitate money laundering 67 Justice Department Seeks Forfeiture of Third Commercial Property Purchased with Funds Misappropriated from PrivatBank in Ukraine, Press Release, Department of Justice Dec. 30, 2020, https www.justice.gov/opa/pr/justice-departmentseeks-forfeiture-third-commercial-propertypurchased-funds-misappropriated; U.S. v. Real Property at 7505 and 7171 Forest Lane, Dallas, Texas 75230, Case No. 1:20cv23278, Doc. 1 S.D.
Fl. Aug. 6, 2020.
68 Acting Manhattan U.S. Attorney Announces $5.9 Million Settlement of Civil Money Laundering and Forfeiture Claims Against Real Estate Corporations Alleged to Have Laundered Proceeds of Russian Tax Fraud, Press Release, Department of Justice May 12, 2017, https www.justice.gov/
usao-sdny/pr/acting-manhattan-us-attorneyannounces-59-million-settlement-civil-moneylaundering-and.
69 New Report Finds U.S. Real Estate Sector a Safe Haven for Money Laundering, Press Release, Global Financial Integrity Aug. 9, 2021, https
gfintegrity.org/press-release/new-report-finds-u-sreal-estate-sector-a-safe-haven-for-moneylaundering/.

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VIII. Scope of Potential Rules
70 National Strategy for Combatting Terrorist and Other Illicit Financing, pp. 1718 2020.
71 Id.

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