The Financial Crimes Enforcement Network (FinCEN) issued a Notice of Proposed Rulemaking (NPRM) on February 7, 2024, to combat and deter money laundering through non-financed residential real estate purchases. The proposed rule is part of a requirement of the Anti-Money Laundering Act of 2020 (AMLA) to initiate transparency within the real estate industry. If approved as written, professionals involved in real estate closings and settlements will have to report information to FinCEN about non-financed residential real estate transfers to legal entities or trusts. This will not include transfers in the name of individuals since this type of transaction is not considered high-risk for money laundering.
Real estate money laundering (REML) is a serious issue that has become increasingly common in recent years. It is no secret that criminals use real estate to clean money derived from illegal proceeds; it’s one of the oldest forms of money laundering. However, the subjective nature of real estate pricing makes for easily manipulated transactions. Treasury Secretary Janet Yellen said in March 2023 that illicit actors laundered at least $2.3 billion through U.S. real estate between 2015 and 2020, and the actual number is almost certainly higher. With heightened Russian sanctions globally, it is more important than ever to understand the typologies associated with money laundering through real estate and to be prepared to detect this activity within your financial institution.
“Illicit actors are exploiting the U.S. residential real estate market to launder and hide the proceeds of serious crimes with anonymity, while law-abiding Americans bear the cost of inflated housing prices,” said FinCEN Director Andrea Gacki of the NPRM. “Today marks an important step toward not only curbing abuse of the U.S. residential real estate sector but safeguarding our economic and national security.”