FinCEN Considering Expanding Anti-Money Laundering Rules to Additional CRE Transactions
December 13, 2021
On December 6, Treasury’s Financial Crimes Enforcement Network (FinCEN) issued an Advance Notice of Proposed Rulemaking (ANPRM) asking for comment on the risk of money laundering in U.S. real estate markets. Click here for the press release.
At the core of the ANPRM is whether FinCEN should extend Anti-Money Laundering (AML) and customer due diligence requirements to “non-financed” or all cash real estate transactions, including residential and commercial properties. FinCEN currently requires AML procedures for certain all cash residential real estate transactions in Manhattan and Miami, but those so-called Geographic Targeting Orders do not extend beyond those cities.
Risks to CREFC Members
The current action likely will not affect many CREFC members. Banks and other financial institutions already have robust AML/KYC/CDD requirements, and those “financed” real estate transactions are likely beyond the scope of the ANPRM. However, if a lender does not currently have AML or similar requirements, the latest effort may extend AML requirements to those transactions.
But even if the broad intent of the ANPRM is focused on all cash real estate transactions, language in the proposal could be concerning to the CRE industry.
- FinCEN is seeking basic information on how CRE transactions work;
- The ANPR asks if requirements should apply beyond “non-financed transactions”;
- “Non-financed transactions” could possibly include CRE mortgage debt originated by some non-banks;
- The commentary made a vague reference to a purchaser “issuing bonds” to buy CRE:
- “An entity may, for example, finance the purchase of a large commercial property via the issuance of bonds. It is unclear whether such a transaction would be viewed to be a cash transaction from the point of view of the entities required to report such a transaction.”
CREFC will continue to analyze the ANPRM and work with its borrower partners. Please contact David McCarthy and Sairah Burki with any questions on comments.