ALTA Submits Comments to FinCEN Regarding Proposed Anti-money Laundering Regulations
February 22, 2022
ALTA submitted a letter to FinCEN in response to the agency’s potential rule that would address the vulnerability of the U.S. real estate market to money laundering and other illicit activity.
The Biden administration is looking to expand reporting requirements to address bad actors’ use of the real estate market to launder money made through illegal means. The effort for new real estate market regulation comes as part of Biden’s U.S. Strategy on Countering Corruption, which highlights the money laundering risks in the U.S. real estate market, as well as the need to protect the sector from abuse from corrupt officials and illicit actors.
FinCEN began issuing Geographic Targeting (GTOs) orders in January 2016 requiring title insurance companies to file reports and maintain records concerning all-cash purchases of residential real estate above a certain threshold in select metropolitan areas of the United States. The GTOs have been renewed and expanded over the past five years.
Currently, title insurance companies in 12 metropolitan areas are required to file reports identifying individuals who make all-cash purchases of residential real estate through shell companies, if the transaction exceeds $300,000. The potential regulation published by FinCEN would expand reporting requirements on all-cash real estate deals. In November, FinCEN renewed the existing GTOs through April 2022.
In its letter, ALTA recommended FinCEN develop tailored and specific transaction reporting requirements for the all-cash real estate transactions involving corporate entities, instead of imposing a traditional anti-money laundering regime like those imposed on banks. ALTA also said FinCEN should finalize regulations for the development of a beneficial ownership database required under the Corporate Transparency Act (CTA) before taking further actions that would add additional burdens to the title insurance industry.
“The collection of beneficial ownership data under the CTA should reduce (if not eliminate) the need for real estate and title professionals to collect and report this duplicative information,” ALTA wrote. “Instead, reporting companies should be able to rely on information already collected under the CTA and only require reporting of beneficial owner data when it is not otherwise collected under the CTA.”
Additionally, given the data coverage of many title data providers, it is possible that FinCEN could develop more targeted real estate programs given those commercial options.
“The burden is currently falling on small businesses and title insurers to gather information and function as ‘private investigators,’” according to ALTA. “Once implemented, the CTA should ensure that most law enforcement asset tracing is possible using those commercial sources. This would make it possible for a real estate rule to focus on specific coverage gaps. A narrower set of real estate specific data would be less costly and time consuming to collect and provide.”
Contact ALTA at 202-296-3671 or [email protected].