Estate Brokers, Escrow Agents, and Title Insurers Urged to Report Suspicious Real Estate Transactions

Washington D.C. - In an effort to combat money laundering and other illicit activities, the Financial Crimes Enforcement Network (FinCEN) has issued several alerts and advisories urging estate brokers, escrow agents, and title insurers to report suspicious transactions involving real estate purchases and sales.

Identifying Suspicious Transactions

According to FinCEN’s March 2022 alert, Russian elites and their family members have been using real estate and other high-value assets to launder money. The alert highlights the importance of identifying and reporting these transactions to prevent further illegal activities.

Kleptocracy and Foreign Public Corruption

In April 2022, FinCEN issued an advisory on kleptocracy and foreign public corruption, which includes potential typologies of illicit schemes and the use of shell companies, offshore financial accounts, and real estate by corrupt regimes. The advisory provides red flag indicators of kleptocracy and foreign public corruption and reminds financial institutions to file Suspicious Activity Reports (SARs) for suspicious transactions.

Reporting Requirements

Title insurance companies are also required to report beneficial ownership information of certain legal entities making non-financed residential real estate purchases above a certain dollar threshold in covered metropolitan areas. FinCEN expects these insurance companies to implement procedures reasonably designed to ensure compliance with the terms of their Geographic Targeting Orders (GTOs).

Risk Assessment

FinCEN is assessing the money laundering risks posed by investment advisers and lawyers, as well as the commercial real estate sector and trusts - gatekeepers to the financial system that are not covered by comprehensive Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) regulations.

Enhanced Due Diligence

To address these risks, FinCEN is encouraging estate brokers, escrow agents, and title insurers to implement enhanced due diligence procedures for high-risk Russian individuals and entities. This includes conducting additional scrutiny on private banking accounts and correspondent accounts involving foreign persons, where necessary.

Guidance and Compliance

FinCEN’s guidance emphasizes the importance of identifying and reporting suspicious transactions involving real estate purchases and sales by sanctioned Russian actors. The agency urges financial institutions to take a risk-based approach to their AML/CFT programs, including enhanced due diligence measures for high-risk customers.

State-Owned Enterprises (SOEs)

Industry experts warn that state-owned enterprises (SOEs) controlled by individuals with close ties to Russian President Vladimir Putin may be used to launder money and evade sanctions. FinCEN regulations require covered financial institutions to obtain beneficial ownership information for their legal entity customers, including SOEs.

Conclusion

In conclusion, estate brokers, escrow agents, and title insurers are urged to be vigilant in reporting suspicious transactions involving real estate purchases and sales by sanctioned Russian actors. By implementing enhanced due diligence procedures and taking a risk-based approach to AML/CFT compliance, these industry professionals can help prevent money laundering and other illicit activities.

Recommended Steps

• Implement enhanced due diligence procedures for high-risk Russian individuals and entities
• Conduct additional scrutiny on private banking accounts and correspondent accounts involving foreign persons
• File Suspicious Activity Reports (SARs) for suspicious transactions
• Obtain beneficial ownership information for legal entity customers, including state-owned enterprises (SOEs)
• Take a risk-based approach to AML/CFT programs, including enhanced due diligence measures for high-risk customers