February 9, 2024

"Just the FACTs" is a round-up of news stories and information regarding efforts to combat corrupt financial practices, including offshore tax haven abuses, corporate secrecy, and money laundering through the financial system.

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Here's the State of Play:
Treasury Releases Groundbreaking Draft Rule on Real Estate Money Laundering

On Wednesday, the Treasury Department advanced a core policy pillar of FACT's anti-money laundering (AML) advocacy agenda with the introduction of long-awaited draft regulations cracking down on dirty money in U.S. residential real estate markets. The proposed rule would establish the first ever nationwide, permanent anti-money laundering regime for U.S. real estate transactions.

While FACT will submit substantive comments to Treasury following an in-depth review, an initial read by the FACT team points to a strong rule that covers a broad range of transactions by legal entities and trusts.

Notably, the draft rule requires information on the beneficiaries of most non-financed residential real estate purchases - defined as both all-cash transactions and other transactions that do not involve a bank or other financial institution with customer due diligence requirements - as well as certain non-sale transfers of ownership.

Moreover, the draft rule incorporates recommendations made by FACT and key allies, including Transparency International U.S. (TI-US), Global Financial Integrity (GFI), and the Anti-Corruption Data Collective (ACDC), during previous consultations on real estate. Importantly, the draft rule would establish a regime that:

* Covers all non-financed real estate transactions involving a covered "transferee" entity, with no minimum dollar value test applied;
* Covers a wide range of legal persons within the definition of a "transferee", including certain trusts, private funds, non-profits, and large operating entities; and
* Includes a cascading reporting obligation, ensuring that someone is always responsible for reporting regardless of how a covered transaction is structured.

The Treasury Department also plans to release a draft rule later this year introducing AML safeguards for commercial real estate transactions. While Treasury has had the broad authority to regulate real estate transactions since the passage of the PATRIOT Act, both the commercial and residential real estate sectors have been subject to a long-lived temporary exemption for more than two decades.

The release of this draft rule marks an important turning point in the ongoing implementation of the Administration's 2021 Strategy on Countering Corruption, which establishes the fight against illicit finance as a core national security priority. Since the release of the Strategy, much of the Treasury's Department's efforts have focused on implementing beneficial ownership transparency under the Corporate Transparency Act (CTA).

With the CTA's ownership registry up and running as of the beginning of the year, other core AML priorities outlined in the Strategy - including draft regulations addressing vulnerabilities in U.S. real estate and private investment markets - are now beginning to take center stage.

European Union Poised to Improve Access to Beneficial Ownership Information

The European Union reached an agreement last month on details of its Sixth Anti-Money Laundering Directive (AMLD6), which includes revised regulations for real estate transactions, various reforms in the treatment and monitoring of cryptocurrency transactions, and new access authorizations for actors with "legitimate interest" in beneficial ownership information collected by EU member states.

The revisions to beneficial ownership information access protocols are of particular significance, as they somewhat ameliorate the impacts of a controversial 2022 ruling by the Court of Justice of the European Union that threatened to revoke public access to ownership information, except for users with a "legitimate interest."

While AMLD6 will not restore full public access to European state beneficial ownership databases, the definition of "legitimate interest" adopted under last month's agreement covers key stakeholders including journalists, certain NGOs, and foreign governments. Once access is granted to a given party, they will be able to view all registered information throughout the EU for three years, without the need to reapply for subsequent requests or to apply separately in each member state.

Latest from FACT

Blog: Can't Stop, Won't Stop: The FACT Coalition's 2023 Year of Impact

FACT executive director Ian Gary looks back on a year of policy wins, new members, and media attention for the FACT Coalition, and forecasts more victories to come in 2024.

From the blog: "While some long-walked roads seem to be reaching their ends, the work continues. With Treasury at last advancing much needed new rules addressing money laundering through U.S. real estate and private investment markets, the push for true multinational tax transparency entering a dynamic new phase, and ever-increasing awareness of how U.S. financial secrecy fuels environmental crimes in vulnerable areas across the globe, FACT's mission remains as important as ever."

Blog: Time to Clean House: Unpacking the Harms of Massive Money Laundering in the Real Estate Sector

Read FACT policy fellow Luke Rowe's latest blog on the societal impacts of dirty money laundered through U.S. and Australian real estate, from inflated property prices to the erosion of public confidence in the rule of law.

"Along with economic instability and inequality, issues like environmental degradation and climate change are cited as leading causes for pessimism for younger generations," he writes. "And here too there is a real estate connection, because behind all money laundering is a crime and its proceeds being obscured. As we see an increasingly fragmented and warming world, the proceeds of crimes that destabilize our communities and destroy our environment are funneled into the places, our homes, where we ought to feel safest."

Watch: FACT, Allies Host Press Briefing Outlining Policy Agenda for 2024

Watch the full recording of FACT, TI-US, and GFI's January press briefing detailing the Coalition's main policy areas to watch in 2024, including imminent actions by Treasury addressing money laundering risks through U.S. real estate and private investment markets, as well as new work at the intersection of environmental and financial crime.

FACT in the News

Wall Street Journal: U.S. to Tackle Anonymity in All-Cash Home Purchases

FACT executive director Ian Gary was quoted in the Wall Street Journal's coverage of Treasury's proposed rule on real estate money laundering.

"This draft rule sends a clear message that the U.S. plans to close off options for criminals looking to hide their ill-gotten gains in our real-estate markets," said Gary.

Associated Press: Treasury Rolls Out Residential Real Estate Transparency Rules to Combat Money Laundering

Ian Gary was also quoted in coverage of Treasury's real estate NPRM by the Associated Press' Fatima Hussein, as well as in coverage by Reuters' Chris Prentice.

Hussein's coverage also included quotes from FinCEN Director Andrea Gacki, who outlined the systemic issue of real estate money laundering in the U.S.

"Illicit actors are exploiting the U.S. residential real estate market to launder and hide the proceeds of serious crimes with anonymity, while law-abiding Americans bear the cost of inflated housing prices," she said.

Anti-fraud Groups Praise FinCEN AML Proposal for Real Estate Transactions

Ian Gary was quoted in Compliance Week alongside TI-US Executive Director Gary Kalman praising Treasury's proposed rule.

"By finalizing strong anti-money laundering safeguards for the multi-trillion dollar real estate sector," said Kalman, "the Biden administration can live up to its commitments and catapult the United States from being a laggard to a leader in the global fight against corruption and illicit finance."

Recent and Upcoming Events

February 14: Hearing Entitled: Oversight of the Financial Crimes Enforcement Network (FinCEN) and the Office of Terrorism and Financial Intelligence (TFI)

Top Treasury officials are expected to appear before the House Financial Services Committee (HFSC) next Wednesday during an annual oversight hearing of the Financial Crimes Enforcement Network (FinCEN) and the Office of Terrorism and Financial Intelligence (TFI).

FinCEN, as the bureau of the Treasury responsible for implementing the administration's anti-money laundering agenda, is likely to present updates during the hearing on both the launch of its beneficial ownership database under the Corporate Transparency Act, and its recently-released draft rule targeting money laundering through U.S. real estate.

More information, including witnesses expected to appear and livestream details, will be made available in the coming days through the link above.

May 15-17: International Anti-Corruption Conference 2024

The 2024 International Anti-Corruption Conference (IACC) - the premier global conference bringing together heads of state, community activists, non-profits, high-level policymakers, businesses, policy experts, and academics to address the complex challenges posed by corruption - will be held from May 15-17 in Vilnius, Lithuania.

Registration for the conference is now live. The open call for workshops closes on February 15.

About the FACT Coalition

The Financial Accountability and Corporate Transparency (FACT) Coalition is a non-partisan coalition of more than 100 state, national, and international organizations working toward a fair and honest tax system that addresses the challenges of a global economy and promotes policies to combat the harmful impacts of corrupt financial practices.

For more information, visit www.thefactcoalition.org

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