Tag: AML

FATF on Money Laundering and Terrorist Financing Through the Real Estate Sector

The Financial Action Task Force published their report on Money Laundering & Terrorist Financing Thorugh the Real Estate Sector (June 29, 2007).

I was disappointed in the report. I have a history of structuring complex real estate transactions. The report did little to help distinguish between legitimate and illegitimate structures. All of the structures and most of the transactions described in the report have completely legitimate uses. There are lots of tax and regulatory reasons for use of structured loan, trusts and many entities.

What the report missed was how the illegitimate funds got into the structures.

For those of you who are not familiar with real estate structures and transactions, the report does provide some interesting case studies. The red flag indicators in Annex B is a useful list.

Effects of FinCEN’s Withdrawal of Rule-Making on Anti-Money Laundering

Last week, FinCEN withdrew a proposed rulemaking for anti-moneylaundering procedures for unregistered investment companies. [See: FinCEN Withdraws Proposed Rulemaking for Unregistered Investment Companies]
FinCEN warned that they have not abandoned plans for rule-making. They merely felt that after six years the notice had gone stale. FinCEN may come out with AML program rule proposal, but would only do so after allowing for public comment that could take into account developments since the initial proposal.

Other existing AML obligations may limit the practical effect of this FinCEN action. First, the action does not alter the reach of the U.S. criminal money laundering laws, which still may apply in cases of “knowing” or “willfully blind” participation in money laundering schemes. Second, the FinCEN action does not affect the obligation of the subject entities to comply with the U.S. sanctions programs, which are administered by the U.S. Office of Foreign Assets Control (“OFAC”). Third, many advisers, unregistered investment companies, and commodity trading advisers likely will continue to be required by their investors, banks, prime brokers, and other counterparties to adopt AML programs, regardless of the scope of applicable legal standards. Entities may also be subject to AML regulation in non-U.S. jurisdictions where they conduct business or investment activities.