The U.S. Department of the Treasury issued a report that recommends a new rule that would require real estate professionals to identify potential money laundering schemes in the residential real estate markets.
The “National Money Laundering Risk Assessment” report put forth by Treasury’s Financial Crimes Enforcement Network (FinCEN) seeks to have real estate professionals flagging suspicious activity connected to all-cash cash residential home purchases. Other stakeholders in the real estate process – including title insurance companies and attorneys – would also be required to report questionable all-cash transactions. Previously, such reporting was limited to financial services companies.
“Because of the key role real estate professionals play in closings and settlements, this is a critical vulnerability, and real estate professionals have been found to act as both witting and unwitting participants in money laundering schemes,” said the report.
The report also noted, “Predicate offenses for money laundering through real estate continue to involve domestic and transnational activity, including narcotics trafficking, corruption, human trafficking, fraud, and sanctions evasion. Illicit actors often make non-financed purchases using legal vehicles or arrangements designed to obfuscate the purchaser’s identity and source of funds to integrate ill-gotten proceeds into the formal economy.”
“Whether it’s terrorism, drug trafficking, Russian aggression, or corruption, illicit finance is the common thread across our nation’s biggest national security threats,” said Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson. “Treasury, through our National Risk Assessments, is at the cutting edge of analyzing the global risk environment to protect the U.S. and international financial systems from abuse by illicit actors. We urge both the public and private sectors to engage with these reports, as well as our forthcoming National Strategy for Combatting Terrorist and Other Illicit Finance.”
Treasury is expected to issue a separate report related to commercial real estate later in the year.
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We in the real estate industry are not trained investigators and may miss signs of an illicit transaction. We are generally a trusting group who believes the buyers and sellers in a transaction are capable of doing the deal and are honest in their dealings. Cash transactions happen all the time and the presumption by the agent is that the funds came from another sale, from long term savings, wise investments, inheritance or other legitimate source. I have no issue with the proposed rule, so long as real estate practitioners who might miss something, in what ends up later being determined to be an illicit transaction, cannot be held in any way responsible or liable for a failure to report and should not have to refund any commission earned from the transaction. We are not paid nor trained to be government watchdogs. We are hard working professionals trying to make a living and provide food and shelter for our families.
This article is a bit misleading because the proposed rule change doesn’t apply to realtors/real estate agents/sales agents– only certain BUSINESSES involved in settlements/closing as articulated below in the actual statement put forth by FinCEN:
“FinCEN expects that the obligation to file Real Estate Reports would generally apply to
settlement agents, title insurance agents, escrow agents, and attorneys.”
Actually, the FinCEN language is vague on who is supposed to do the reporting, hence the wording “expects” and “generally apply.” Nor is there a specific standard for a red flag on a potentially dubious transaction. This is still in the proposal stage and is subject to change.
100% agree !!
So, now real estate professionals are being criminalized by the federal government for “wittingly or unwittingly” facilitating money laundering by criminals and terrorists. Yeah, right.
How many actual real estate agents has the federal government arrested, charged, and convicted of participating in money laundering? Show me the money trail. Otherwise it is nothing but more bureaucracy and power grab/control of small businesses.
As a retired Banker this is a bad idea. NAR lobbyists need to fight this vigorously. I witnessed the massive investments Banks had to make in building models, systems and staffing to comply with money laundering rules and regulations. To add insult to injury, if Banks failed in implementing effective money laundry systems (implementing the government’s responsibilities), the Regulators fined and assessed Banks including placing them in punitive administrative agreements. The cash funding for real estate transactions has to flow through the financial system. No one brings a bag of cash to the closing. Financial Services are well equipped to detect and stop money laundering. Adding this responsibility to Realtors is absurd.
This should be the job for title (escrow) not agents. Title should vet the money trail not agents. They can even charge a fee for it.
Thank you, I completely agree! We need you running NAR instead of the apparent dimwits they keep hiring.
This is ripe for government abuse! Real estate agents don’t have access to information about their clients’ finances.
Title companies already do that with FinCen. Just make it national rather than certain states. We got enough to deal with.
OH GOODY!!!
More government interference in private businesses. We are not in a position to know where the buyer may have gotten his money.
Is there an incentive for real estate professionals to participate in this elndeabor?
Please more specific what all cash mean? All cash in currency? All cash in the form of no mortgage?
This is BS. We are not law enforcement, nor should we be required to act as such. My son and I purchased homes to flip, using cash. So, I guess we will now be looked at as criminals possibly. This is absurd.
So we will be required to make a cash transaction report on all cash transactions – the 10,000K rule ? or the 9,999 rule ? And the last time I looked, the all cash was a wire transfer from a Bank which had to report it all anyway.
We are not qualified to do this and should not be expected to carry that liability. It’s government over-reaching again with no other real reason except to gain more power and control (and perhaps a scapegoat when they don’t do their job.)
Feels like the Stassi is moving in. Stand up or become west German
Does that extra liability come with benefits? Real Estate agents have it hard enough. How many more hoops do we need to jump through, just to make a living? Ridiculous…
In Florida, 95 percent of my closings are cash. I barely have enough time to see through inspections, contracts, forms, condo reviews, more forms required by law, much less be held liable for the government’s job. Pay me for your laziness but don’t expect me to be held liable for your job. I’d rather leave the industry, as would many others. How on earth could you tell where someone gets their money. I have nothing to do with that, period. Most buyers would consider it an intrusion on their privacy.
Of course, with government, they don’t think we have any privacy and they want to intrude and open your wallets and accounts to them with nothing more than a suspicion.
Our forefathers fought to prevent such invasion but now we are rolling over to give up our freedoms to a government that is overspending and needs help cracking down on legal transactions. No way. I quit first.
If you don’t agree….. which I don’t.. be sure to vote this November….
Ok so as buyer agents we’re supposed to work for free without commissions, now we can work for free for the government as well.
It never ends. Vote for people who are against Government being all powerful. Vote for conservatives.
Ridiculous!!
Political ABUSE!
48 Years in Business, Never a Problem, in this business, it is pretty obvious where the money comes from!
Leave it to the federal government to try to legistlate against good people by adding unreasonable responsibilities to agents who are not qualified to make these decision. It’s another ridiculous rule by a ridiculous administration. Just more woke policy making leading our Country from order to chaos.
Whoever came up with this idea must be nuts. Realtors have an obligation to not discriminate against individuals. In addition, working for commissions is a hard way to make money. Realtors are not trained to be private investigators and it is rude to ask another person where or how did they make their money. This whole concept is not professional.
So I have someone that wants to buy a house – they want to use WhatsApp to communicate- I say cash or financing and they say cash , great you’ll need to send me your proof of funds. They send me a printout of their first page of their bank statement that you can tell is clearly fake with usually $8M dollars in their account and they send that to you. I’ll look up the address again at the name and nothing ever makes sense. These people then try to teach you how to do crypto currency trade. How can we get that info to you. Those people OH and how can we report the people that are posting online that they can create you a fake proof of funds letter, a fake drs note – a fake w-2, a fake paystub. THOSE people should be jailed too. There’s one in my local city FB group and she’ll post it – I’ll create you any of those documents you need!
BIDENOMICS !!!!
Do I have to report it before I collect my commission or can I do it after?
If the banks made mortgages then people wouldn’t have to look around for cash and buy a smaller house. 41 years in the business and we keep becoming watch dogs for the government. I am happy I am at the end of my professional career as it no longer appreciated and some lawyer out there is looking for his next boat payment.