Real Estate Compliance

As a professional or company involved in real estate transactions, there are certain regulatory compliance requirements your business is expected to maintain. The USA PATRIOT Act, the Money Laundering Control Act (MLCA) and Executive Order 13224 are all regulations put in place by the government to ensure that businesses do their part in fighting crime and terrorism in the United States.

More specifically, when referring to the real estate industry, these regulations require the following from businesses like yours.

  • Money Laundering Control Act – A criminal statute that makes it illegal for any person or business that knows money or property is derived from an illegal activity to engage in a financial transaction involving that money or property. Penalties include jail terms and fines as high as $500,000 or twice the amount of the property involved.
  • USA PATRIOT Act – A government regulation that imposes anti-money laundering requirements on loan and finance companies, persons involved in real estate closing and settlements, as well as insurance companies. Under the USA PATRIOT Act real estate companies are required to establish specific anti-money laundering programs and “know your customer” procedures to ensure the verification of their clients and maintain compliance in the industry.
  • Executive Order 13224 – A law prohibiting all U.S. individuals and businesses from engaging in any form of financial transaction with persons or entities designated as terrorists or their associates including those on the OFAC Specially Designated Nationals (SDN) list and other government watch lists. Criminal violations of OFAC regulations can result in corporate and personal fines up to $1 million, as well as prison terms.

Indications of Money Laundering in Real Estate

The American Land Title Association notes the following "red flags" of possible money laundering:

  • A prospective buyer pays for real estate with funds from a high-risk country
  • A seller requests that the proceeds on the sale of real estate be sent to a high-risk country
  • A person seeks to purchase real estate in the name of a nominee and has no apparent legitimate reason for doing so
  • A person appears to be acting as an agent for an undisclosed party
  • A prospective buyer or seller provides suspicious documentation to verify identity

    The Building Owners and Manager Association reports that law enforcement authorities believe real estate to be a prime target for money launderers. Money launderers have used real estate transactions to attempt to disguise the illegal source of their proceeds – which is why all real estate closings, refinances and other real estate transactions have potential OFAC implications.

    Let CSI help you avoid government fines and stay compliant in the real estate industry – Contact us today to learn more about real estate compliance solutions for your business 888.494.8449.

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