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Legal Blog - Law Offices of Richard Palumbo

Monday, November 5, 2018

Senators Spotlight High Risk of Money Laundering in Residential Real Estate

According to the Wall Street Journal, two U.S. senators have called for an investigation into any existing weaknesses within the current U.S. money-laundering provisions.  Some senators believe that the risk of money laundering in residential real estate is high due to the real estate sector having significantly less oversight than the lending sector. That is why they sent a letter to the Government Accountability Office, writing that this great discrepancy in attention paid presents “increased risk of access by foreign and domestic criminal organizations.”

Letter Requests that Department of Treasury’s FinCEN Investigate

The senators have requested that the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) take a look at the laws in question. In the letter, the Senators have asked how FinCEN has used the data in order to help prevent money laundering. Unfortunately, regardless of FinCEN’s new reporting requirements, politics have slowed any efforts to help decrease money laundering within the U.S.

FinCEN Implements New Requirement

In 2016, FinCEN began requiring that title insurance companies report the identities of any anonymous individuals who have bought residential real estate entirely in cash, in areas that have a high vulnerability to illegal activity towards buying. Initially, the law was only to apply to any transactions totaling mire than $3 million in Manhattan, and more than $1 million in Miami. It has already expanded to include Honolulu, Los Angeles, San Antonio, and San Francisco.

Lawmakers Looking to Expand Title Insurance Company Requirement

Now lawmakers are attempting to expand this requirement from just those vulnerable locations to all U.S. transactions. This requirement would help to prevent anyone hiding behind a limited liability company from committing money laundering in order to purchase expensive real estate.

In South Florida, federal authorities are in the midst of seizing 16 high-end properties, which are allegedly tied to the same individuals who are currently defendants of a $1.2 billion Venezuelan money laundering case.

Congress Pushes for More Transparency in Real Estate Transactions

All of this follows Congress’ desire for more transparency in real estate transactions. Though corporate transparency advocates have welcomed the new title insurance provision, they do not believe that it will serve to overhaul the issue of money laundering in the United States; that a more comprehensive reform is necessary. Instead, they believe that beneficial ownership must be disclosed at the same time that an LLC is incorporated. Title insurance companies are in agreeance that ownership disclosure at the time of LLC formation would eliminate the need for them to investigate who is behind a company.

 


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The Law Offices of Richard Palumbo, LLC assists clients with Real Estate Law, Business Law, Probate, Evictions for Landlords and Property Damage matters in Rhode Island including Cranston, Warwick, Coventry, Johnston, Providence, Pawtucket, Central Falls and all areas throughout RI.



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