. You can read more on the rules of conduct and view the NSW Fair Trading Supervision Guidelines here. REINSW offers training subsidised by the NSW Government: New Home Sales vs. Please detail any aspects of possible FinCEN rules that may cause your business to operate at a competitive disadvantage compared to any businesses that offer similar services, if such businesses would be outside the scope of any FinCEN rules. documents in the last year, 474 [65], In 2018, the National Money Laundering Risk Assessment noted the vulnerability of commercial real estate to illicit activity, highlighting a 2013 case involving the laundering of drug proceeds by a real estate agent through real estate, including commercial properties. See generally 7. What kinds of professionals or participants are most able to request, verify, and report documentation related to purchasers? See generally 68 FR 17569 (Apr. Please note any differences not already covered in provision of services for residential real estate transactions versus those for commercial real estate transactions. FinCEN: The FinCEN Regulatory Support Section at 1-800-767-2825 or electronically at 03/01/2023, 267 [35] Definition of Trust, Internal Revenue Service, Property and Stock Agents Regulation 2014 Part 2 - Long Title and Purpose 1. . Should FinCEN's proposed rule be limited to residential real estate or should FinCEN cover transactions involving other forms of real estate ( For example, while the line between financed and non-financed transactions is relatively well-defined in the residential real estate market, this is not necessarily the case with commercial real estate transactions. The Real Estate GTOs initially required some of the largest title insurance companies in the United States to report beneficial ownership[49] Comm'n of Md. Please describe when an escrow account must be used for a real estate transaction. At the same time, FinCEN recognizes that an iterative approach may be warranted given the complexities and differences between different market sectors and the potential burdens that new reporting and recordkeeping requirements may have for businesses. Such an approach would involve the application of AML/CFT program rules that traditionally include four requirementsadoption of AML/CFT policies and procedures, designation of an AML/CFT compliance officer, establishment of an AML/CFT training program for appropriate employees, and independent testing of the program to ensure compliance. The NSW Supreme Court on Tuesday ruled in favour of Bill Gertos in the bizarre squatter's rights case brought by the daughter and grandchildren of the deceased owner. Although in recent years FinCEN has focused its information collection efforts on non-financed purchases of residential real estate by shell companies, FinCEN believes that other areas of the real estate market, such as commercial real estate and certain real estate purchases by natural persons, may merit regulatory coverage. It was viewed 59 times while on Public Inspection. Additionally, FinCEN seeks specific comment on whether to include trustsbroadly defined as a legal relationship in which one person holds title to property, subject to an obligation to keep or use the property for the benefit of anotherwithin the reporting 31 U.S.C. [55] Tenn. Aug. 20, 2019); General Information Regarding the Real Estate Market. by the Housing and Urban Development Department This cooling-off period can be waived by signing a waiver. 15, 2020). Expert Answer. How can FinCEN craft the information required to avoid overly burdensome or duplicative reporting requirements? 0000003025 00000 n G. Should FinCEN promulgate general AML/CFT recordkeeping and reporting requirements for persons involved in real estate closings and settlements? The Secretary may prescribe minimum standards for such programs, and may exempt any financial institution from the application of such standards. The Property and Stock Agents Act 2002 reforms which came into effect on 23rd March 2020, brought with them the revised Supervision Guidelines which extend upon the previous obligations on a licensee that arise from section 32 of the Act. The report further noted that there appeared to be an increasing trend towards using commercial real estate-related accounts to launder money for PEPs. provide legal notice to the public or judicial notice to the courts. Each time a new version of the Manual is released, subscribers will be notified and given details of whats changed, which means areas for prompt review are easily identifiable. FinCEN seeks comment on which legal entities should be included. 308, 1, 37 Stat. Raul Torres, v. Case No. the material on FederalRegister.gov is accurately displayed, consistent with 20. v. Document Drafting Handbook ; Summary of August 2021 Existing Home Sales Statistics, National Association of Realtors (Sep. 22, 2021); Lawrence Yun, 2021 International Transactions in U.S. Step-by-step explanation The monthly trust account processes required by legislation and the Supervision Requirements of the Property and Stock Agents Act 2002, Section 32 is a process of recording, summarising and reporting of trust accounts. What are the products, services, activities, or affiliations associated with residential real estate transactions? Property and Stock Agents Act 2002 2. 03/01/2023, 43 The Property, Stock and Business Agents Regulation 2003 . [82]. Times See Case No. United States ][5]. the official SGML-based PDF version on govinfo.gov, those relying on it for 11. 69. Ct. App. 68. What are the benefits and drawbacks of a new form requirement to file key information deemed important by FinCEN versus full AML/CFT program requirements? Start Printed Page 69601 See generally FinCEN seeks comments on how such requirements, as well the fifth requirement, CDD rules[73] . Case No. . v. Other BSA reporting requirements have other thresholds. Miller, Typically, what percentage of the sale price do these costs represent? Each document posted on the site includes a link to the If so, what information must be recorded or reported, to whom, for how long, and what entity provides oversight and ensures compliance? FinCEN seeks comments on whether to assign a hierarchical, cascading reporting obligation on different entities depending on which are involved in a particular covered transaction, in a manner similar to the IRS's regulation for submitting Form 1099-S (Proceeds from Real Estate Transactions). Should FinCEN's proposed rule be limited to non-financed transactions (all-cash)? See, e.g., FinCEN began to receive feedback from law enforcement partners that the information was useful for generating new investigative leads, identifying new subjects in ongoing cases, and informing forfeiture efforts, among other things. Open for Comment, Economic Sanctions & Foreign Assets Control, Electric Program Coverage Ratios Clarification and Modifications, Determination of Regulatory Review Period for Purposes of Patent Extension; VYZULTA, General Principles and Food Standards Modernization, Further Advancing Racial Equity and Support for Underserved Communities Through the Federal Government, Anti-Money Laundering: Real Estate Transactions, Anti-Money Laundering Regulations for Real Estate Transactions, V. Real Estate Geographic Targeting Orders, VII. Describe the potential money laundering and illicit finance risks and vulnerabilities arising in the U.S. real estate market. United States The model presented in this section is then used in simulations that trace the path from inequality to growth in Section 8. 35. Given the vulnerabilities of the U.S. real estate sector to money laundering and other illicit activities, FinCEN believes that additional regulatory steps may be needed to ensure consistent reporting on a nationwide basis. 386 F. Supp. a cashier's check, currency or a money order). Start Printed Page 69597, As explained above, FinCEN's existing regulations require banks, RMLOs, and GSEs to comply with the BSA's general recordkeeping and reporting requirements, including the requirement to file SARs and to establish AML/CFT programs. https://www.nar.realtor/newsroom/existing-home-sales-recede-2-0-in-august 2:18-cr-00103-RDP-JEO, Doc. Such guidelines, however, are not mandatory or subject to oversight or enforcement and may therefore be avoided by illicit actors. Should FinCEN implement information collection requirements only for transactions meeting a specified cost or value threshold? Given that existing home sales comprise approximately 90% of the residential real estate market in the United States, FinCEN estimates that the all-cash purchase rate of real estate transactions in the United States is approximately 18.5%. As Treasury explained in its 2020 National Strategy for Combating Terrorist and Other Illicit Financing, [c]riminals with widely divergent levels of financial sophistication use real estate at all price levels to store, launder, or benefit from illicit funds. In that report Treasury identified the risks of the laundering of illicit proceeds through real estate purchases as a main vulnerability and key action item for strengthening the U.S. Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) framework. 21. Compliance with the previous version of the Supervision Guidelines does not necessarily ensure compliance with the new version. [3], Indeed, as the Congressional Research Service recently noted, real estate money laundering schemes can involve a wide range of conventional domestic criminals, as well as transnational criminals, including drug cartels and human traffickers, international terrorists, and foreign kleptocrats (corrupt high-level officials).[4] Identify specific activities and services that present the highest and Anti-Money Laundering Guidelines for Real Estate Professionals, https://www.nar.realtor/articles/anti-money-laundering-guidelines-for-real-estate-professionals. FinCEN seeks comment on which persons should be required to collect information, maintain records, and report information regarding non-financed purchases of real estate. https://www.justice.gov/opa/pr/united-states-reaches-settlement-recover-more-700-million-assets-allegedly-traceable;; FinCEN solicits comment on money laundering activities (in general terms, not identifying actual parties or properties involved) in connection with real estate transactions, the existence of any safeguards in the sector to prevent money laundering, and what additional steps may be necessary to protect the real estate industry from abuse by money launderers. Div. If program or other requirements were limited to purchases above a certain price threshold, how would this affect: (i) The burden of implementing such potential rules; and (ii) the utility of such potential rules for addressing money laundering issues in the real estate market? If so, how could FinCEN minimize the burdens of such a requirement? 315;ing out the purposes of this chapter. An entity may, for example, finance the purchase of a large commercial property via the issuance of bonds. 22 . 12. Later iterations of the Real Estate GTO required the GTO information to be reported via FinCEN Form 104 (Currency Transaction Report). 74. PROPERTY AND STOCK AGENTS ACT 2002 - As at 13 January 2023 - Act 66 of 2002 TABLE OF PROVISIONS Long Title PART 1 - PRELIMINARY 1. In contrast to FinCEN's use of Real Estate GTOs to focus on all-cash transactions involving residential real estate, FinCEN decided at the time not to impose a reporting requirement on all cash commercial real estate transactions. What percentage of residential real estate purchases are all-cash transactions? See, e.g., 26. If you believe FinCEN should cover other forms of real estate, should FinCEN do so in conjunction with the regulation of residential real estate transactions or separately? In that way, the IRS regulation ensures that for every transaction, some entity involved is required to report. FinCEN's website to review comments submitted, at Typical closing transactions may involve several participants, performing distinct, but complementary, functions, in addition to the buyer and seller. in the United States real estate market. Coffman, that agencies use to create their documents. Commercial real estate transactions? United States While every effort has been made to ensure that 5318(a)(2). 51. Accordingly, FinCEN intends to begin the rulemaking process to address such vulnerabilities. 2. Which financial institutions and nonfinancial trades and businesses are in a position to ascertain and report: (i) The identity of the legal entity or legal arrangement purchaser of the real estate; (ii) the natural person(s) who are the direct or indirect owners of the legal entity or arrangement purchaser; (iii) the specific details of the transactions ( Section 52 of Property and Stock Agents Act (NSW) 2002 establishes a list of 'material facts' that an agent must disclose. 559 F.3d 303 (5th Cir. The [42] should verify the contents of the documents against a final, official [33] In later Real Estate GTOs, FinCEN excluded from the definition of legal entity any entity for which the shares are publicly traded on a U.S. stock exchange. 859 F. Supp. Should FinCEN geographically limit the scope of any proposed regulation? FinCEN also invites general comments regarding the risk of money laundering and other illicit financial activities in the real estate market and the extent to which any reporting requirements would address that risk. Commencement 3. To help you understand your responsibilities as a licensee, NSW Fair Trading has issued Supervision Guidelines, which clarifies what constitutes the proper supervision of the business of a licensee. 15. to the courts under 44 U.S.C. 2005) (purchase of two properties in North Carolina); In evaluating reporting from the Real Estate GTOs issued since 2016, FinCEN and law enforcement agencies believe that a substantial proportion of the reported transactions for the purchase of property involved a beneficial owner who was also the subject of a SAR. FinCEN's analysis found that the top four reported fraud categories were: False documents, misappropriation of funds, collusion-bank insider, and false statements. 77. documents in the last year, 20 64. . While a PDF of the Manual can be downloaded and printed, REINSW does not recommend it. Is title insurance required in most of the transactions? How often are real estate brokers or agents used in all-cash residential real estate transactions? 322 (Oct. 26, 2001); 31 U.S.C. 41. 68. The term PEP generally includes a current or former senior foreign political figure, their immediate family, and their close associates. 5318(g)(1) and related program requirements under 31 CFR 5318(h).[2]. Which would be better and why? Second, the attractiveness of the U.S. real estate market as a stable vehicle for maintaining and increasing investment value also contributes to its vulnerability to money laundering activity. https://www.census.gov/construction/nrs/newvsexisting.html. requirement for persons involved in real estate closings and settlements (2003 ANPRM). see also 0000002747 00000 n Case No. For purposes of the Real Estate GTOs, residential real property means real property (including individual units of condominiums and cooperatives) designed principally for the occupancy of from one to four families. 1:20-cv-23278, Doc. What percentage of commercial real estate purchases are all-cash transactions? 73. https://www.census.gov/construction/nrs/pdf/quarterlysales.pdf. United States In the 2011 report, which focused on commercial real estate financing fraud, FinCEN found that SAR filings involving such fraud almost tripled between 2007 and 2010. Although the Real Estate GTOs have been targeted at particular geographic locations within the United States, FinCEN's preliminary view is that fully addressing the money laundering vulnerabilities in the real estate market requires a nationwide rule. 80. 76. are not part of the published document itself. 31 CFR parts 1020, 1029, 1030. Quick Real Estate Statistics, National Association of Realtors (Nov. 11, 2020), This PDF is United States ); (vi) the purpose of the transaction; (vii) the intended use of the proceeds of a sale; and (viii) the businesses involved in the transfer of funds? 19. eqAGNr9o6V$)/\Y}?l06s@(t5sc1#9Gc6:K5Se`M#_=(L[g!=3R25I8 jI=ZZM,R2w7\qf~k-)2 d'}NJaDY#$. 21, 2021), see also In addition, real estate transactions can involve the transfer of title, legal ownership, or equitable ownership, or a combination thereof. Create a website account to receive industry news plus event and special offer updates and more. LLC as Rights Agent (incorporated herein by reference to to Exhibit 4.1 of the Company's Form 8-K filed on November 14, 2022) . Real Property Located in Potomac, Maryland, Commonly Known as 9908 Bentcross Drive, Potomac, MD 20854, If not, why? What would be the costs, burdens, and benefits associated with requiring a new form that would report key elements of information deemed highly significant by FinCEN? 32. 20-cv-02071, Doc. 1 (D. Md. on FederalRegister.gov CNBC.com 13. To further understand the links between opaque transactions and individuals engaged in potentially illicit activity, and to give law enforcement more time to analyze and use the newly collected data, FinCEN renewed the initial GTOs and included additional metropolitan areas. 42. Under the Real Estate GTOs, only cash purchases by the following legal entities are reportable transactions: a corporation, limited liability company, partnership or other similar business entity, whether formed under the laws of a state, or of the United States, or a foreign jurisdiction, other than a business whose common stock or analogous equity interests are listed on a securities exchange regulated by the Securities and Exchange Commission (SEC) or a self-regulatory organization registered with the SEC, or an entity solely owned by such a business. Given the known money laundering typology of using shell companies to obscure the ultimate owners of real estate, FinCEN believes these entities should likely be covered in any proposed regulation. 2d 613 (M.D.N.C. 34. 36. Should FinCEN provide a lower limit or Being the first in 2007 to publish the full Dutroux X-Dossier file, including all the establishment names, after 1.5 years of research and writing, it was only natural to try and figure out if I could do the same with Haut de la Garenne when the case first made international headlines in 2008. Describe your views on whether typical customer identification and verification, AML, SAR, and CTR rules would appropriately address risks in the real estate market and what burden they would entail. v. Law enforcement input and actions further indicate that residential real estate presents significant money laundering risk. [32] This website provides information of a general nature about REINSW, its products and services, and real estate practice in NSW. In 2003, FinCEN issued an ANPRM regarding the AML/CFT program 0000001120 00000 n For section 28(1) of the Act, the activities that may be performed under a limited real estate agent's licence Include 1506-AB54 in the submission. [21] https://gfintegrity.org/press-release/new-report-finds-u-s-real-estate-sector-a-safe-haven-for-money-laundering/. The Manual has been developed to help you implement the Supervision Guidelines with ease and efficiency. 69. 0000000927 00000 n [60] Acting Director, Financial Crimes Enforcement Network. FinCEN explained that it would continue studying the money laundering risks posed by these institutions in order to develop appropriate anti-money laundering program requirements, but that additional time was needed to consider the businesses that would be subject to such requirements, as well as the nature and scope of the AML/CFT risks associated with those businesses. 66. This means that REINSW is on a journey of continuous improvement and will be regularly reviewing the Manuals content and updating and enhancing it, as necessary. For example, a FinCEN advisory published in May 2017 stated that the proportion of such overlap was more than 30%. LEXIS 141157 (M.D. See [29] Existing Home Sales, U.S. Census Bureau, These areas are: (1) The Texas counties of Bexar (includes San Antonio), Tarrant, and Dallas; (2) the Florida counties of Miami-Dade, Broward, and Palm Beach; (3) all New York City boroughs: Brooklyn, Queens, Bronx, Staten Island, and Manhattan; (4) the California counties of San Diego, Los Angeles, San Francisco, San Mateo, and Santa Clara; (5) the City and County of Honolulu in Hawaii; (6) the Nevada county of Clark (includes Las Vegas); (7) the Washington county of King (includes Seattle); (8) the Massachusetts counties of Suffolk and Middlesex (includes Boston and Cambridge, respectively); and (9) the Illinois county of Cook (includes Chicago). 59. Please describe any programs that persons involved in real estate closings and settlements may already have in place to meet existing legal obligations, in addition to the requirement to report on Form 8300 the receipt of over $10,000 in currency and certain monetary instruments. However, as anyone operating a real estate agency knows all too well, running a business involves a multitude of moving parts and thats to say nothing of the complexity of the legal framework that every business must adhere to in order to ensure compliance. What are the key benefits for a particular stakeholder ( 74. [46] 21, 2021), Existing-Home Sales Climb 2.0% in July, National Association of Realtors, (Aug. 23, 2021), What specific factors or characteristics in your business model would justify deviating from the typical AML/CFT program, recordkeeping, and reporting obligations? SCHEDULE 1 - Amendment of Property, Stock and Business Agents Act 2002 No 66 [1] Section 11 Registered salespersons and managers required to be employed and supervised by licensee . If not, how common is the use of title insurance? For complete information about, and access to, our official publications State By purchasing a 12-month subscription to the Manual, youll receive: Subsequent annual renewal: $110 (GST inc). In 2019, the European Parliament Research Service (EPRS), the European Parliament's in-house research service, published a briefing indicating the widespread use of real estate in money laundering, and in particular, highlighted the necessity of identifying purchasers of real estate and proper regulatory coverage of professionals involved in such transactions via AML reporting mechanisms. 35. https://cdn.nar.realtor/sites/default/files/documents/ehs-08-2021-summary-2021-09-22.pdf v. 15. See United States Consequently, there exists a vulnerability that illicit actors can exploit to launder the proceeds of criminal activity by purchasing real estate through all-cash transactions. From VOLVO, BMW and OFFICEWORKS 62. on 29, 2018) (purchase of multiple properties in Alabama); However, in doing so, care should be taken to ensure any changes and additions do not remove or amend the Manuals compliant content. Blair, Because any printed version will not include the regular updates released by REINSW and will quickly become out of date. . 0000009050 00000 n Start Printed Page 69596 id. The Company has filed with the Securities and Exchange Commission (the "Commission") and the Commission has declared effective, in accordance with the provisions of the Securities Act, a registration statement on Form S-3 (File No. International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation: The FATF Recommendations, Financial Action Task Force, pp. corresponding official PDF file on govinfo.gov. If you are a member sign into update your communication preferences to ensure you don't miss an update. Property and Stock Agents Act 2002 No 66 Status information Long title Part 1 Preliminary 1 Name of Act 2 Commencement 3 Definitions 3A Real estate agent functions 3B Strata managing agents 4 Regulations may exempt persons and activities from Act 5 Exemptions 6 (Repealed) Part 2 Licences and certificates of registration Section 32(4) of the Property and Stock Agents Act 2002 (NSW) allows the Commissioner for NSW Fair Trading to issue guidelines as to what constitutes the proper supervision of the business. 5318(a)(2), as amended by Section 6102(a) of the AML Act, which authorizes the Secretary to "require a class of domestic financial institutions . Register (ACFR) issues a regulation granting it official legal status. United States FinCEN is considering the extent to which these risks can be addressed. Financial Crimes Enforcement Network (FinCEN), Treasury. Realtor.com, PROPERTY AND STOCK AGENTS ACT 2002 - SECT 32 32 Duty of licensee and person in charge to properly supervise business (1) A licensee must properly supervise the business carried on by the licensee. Asia Pacific; EMEA; Latin America; UK Solicitors publication in the future. FinCEN notes that money laundering risks stem from transactions in both the commercial and residential real estate sectors, and both merit appropriate regulatory treatment. Are there particular concerns that smaller businesses may have regarding the implementation of an AML/CFT program? 39. . documents in the last year, 983 19-20 (Jun. For the GTO, beneficial owner has been defined as an individual who, directly, or indirectly, owns 25 percent or more of the equity interests of the legal entity that purchased the residential property. In contrast, FinCEN's GTOs have subjected title insurance companies in the non-financed real estate market to a more specific reporting requirement applicable to all covered transactions. This count refers to the total comment/submissions received on this document as reported by Regulations.gov (last updated on 02/28/2023 at 12:35 pm). A typical real estate transaction, for example, may involve real estate brokers and agents (representing sellers and buyers); one or more attorneys who represent the buyer or the seller; a title or title insurance company representative, which may include an attorney; a closing agent (title or escrow); an appraiser, who may assess the value of the real estate; and an inspector to identify code violations and needed repairs before closing. In evaluating any potential imposition of general AML/CFT requirements, FinCEN must consider the extent to which the standards for AML/CFT programs are commensurate with the size, location, and activities of persons in this industry. In part due to such added complexity and opacity, the risks and vulnerabilities associated with the residential real estate sector covered by the GTOs may be compounded in transactions involving commercial real estate, as there are additional types of purchasing options and financing arrangements available for parties seeking to build or acquire property worth up to hundreds of millions of dollars. Case No. Start Printed Page 69591 FinCEN also invites comments on whether to address both commercial and residential real estate sectors in the same rule or to take an iterative approach. 188 A.3d 1009 (MD Ct. App. Lastly, real estate transactions involving purchases by publicly traded companies have been exempted.[57]. 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