It is no secret that foreign kleptocrats and other crooks like to stash their illicit cash in U.S. real estate (see here, here, here and here). A recent report from Global Financial Integrity (GFI) found that more than US$2.3 billion were laundered through U.S. real estate in the last five years, and half of the reported cases of real estate money laundering (REML) involved so-called politically exposed persons (mainly current or former government officials or their close relatives and associates). The large majority of these cases used a trust, shell company, or other legal entity to attempt to mask the true owner of the property.
Shockingly, the U.S. remains the only G7 country that does not impose anti-money laundering (AML) laws and regulations on real estate professionals. But there are encouraging signs that the U.S. is finally poised to make progress on this issue. With the backing of the Biden Administration, the U.S. Treasury Department’s Financial Criminal Enforcement Network (FinCEN) has published an advance notice of proposed rulemaking (ANPRM) that proposes a number of measures and floats different options for tightening AML controls in the real estate sector. The U.S. is thus approaching a critical juncture: the question no longer seems to be whether Treasury will take more aggressive and comprehensive action to address REML; the question is how it will do so. And on that crucial question, I offer three recommendations for what Treasury should—and should not—do when it finalizes its new REML rules: