CATF Reports Dec. 12, 2016, 3:40pm


The Financial Action Task Force (FATF), an inter-governmental organization to combat money laundering, gave the United States a subpar report card in its most recent assessment of the U.S.’s anti-money laundering and counter-terrorist financing (AML/CFT) framework, as reported by Reuters on December 1st. The many shortcomings include failure to mitigate laundering risk with respect to shell companies, accountants, and interestingly, real estate agents.

The real estate industry falls under FATF’s Designated Non-Financial Businesses and Professions (DNFBP) sector, whose non-existent AML/CFT requirements leave much to be desired. Of the roughly 394,400 real estate agents that comprise the U.S. market, the greatest vulnerability for money laundering seems to lie in high-end transactions, which are associated with legal entities rather than lenders. As the FATF report noted, “particularly at the high-end of the market, purchasers often use legal persons to hold real estate and the opaqueness of legal persons…is a vulnerability which can be exploited by illicit actors”. Additionally, while agents are highly involved in the negotiations and vetting of these potential buyers, they “are not required to notify authorities if they suspect a customer is trying to move dirty money through property”.

Going forward, FATF proposes finally implementing AML/CFT requirements for the real estate sectors, as well as capitalizing on the existing Geographic Targeting Order (GTO) initiative, which compiles information on those involved in real estate transactions, to curb further money laundering risks.

From Reuters:

“The United States received failing scores for its efforts to prevent the laundering of criminal proceeds by shell companies, accountants and real estate agents, the Financial Action Task Force (FATF) said in a report released Thursday. […]

But the United States did not do enough to rein in corporate secrecy, presenting “serious gaps” in law enforcement efforts that leave the financial system “vulnerable” to dirty money, the report said. […]

FATF also gave Washington a failing score for its minimal monitoring of non-financial industries sometimes used in money laundering, such as law firms and realtors.”

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