A coalition of Puerto Rico-based privacy groups has filed a lawsuit to block the new anti-money laundering rule issued by the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN).
The San Juan Daily Star reports the rule, officially known as the Anti-Money Laundering Regulations for Residential Real Estate Transfers, will require stakeholders in residential real estate transfers that do not involve a mortgage to disclose the beneficial owners of the legal entities and trusts involved in the transactions.
The plaintiffs claim the rule is “unprecedented” and “unbounded,” and they warn it will disrupt privacy rights by disclosing sensitive ownership information while creating new cybersecurity risks because data will need to be stored for at least five years.
The lawsuit also alleges the rule will significantly harm transactions in Puerto Rico, where property buyers often use trusts or legal entities to maintain privacy and safety. The plaintiffs insist Puerto Rico regulations already allow substantial identity mapping and that the new federal rule would erase those privacy safeguards.
Among the organizations in the plaintiffs’ coalition are the Puerto Rico Privacy Association, ViveApto Trust, and Pilar Fiduciary Services LLC.
“The rule imposes these draconian reporting requirements even though there is nothing inherently suspicious about purchasing property without taking out a loan,” the lawsuit stated. “There are many legitimate reasons for parties to avoid financing, including – most obviously – the opportunity to save hundreds of thousands of dollars (or more) in lending costs and interest payments. By the same token, there are many innocuous reasons for purchasing real estate through a trust or entity that shields beneficial ownership. A party may structure a transaction in an attempt to limit liability, further a broader investment strategy, promote tax planning, or maintain privacy for the sake of personal safety.”
