This Week in AML
This week FinCEN issued an Advance Notice of Proposed Rulemaking (ANPRM) on Anti-Money Laundering Regulations for Real Estate Transactions and a Notice Proposed Rulemaking on Beneficial Ownership Information Reporting Requirements. The ANPRM asks for comments on how to bring US real estate transactions more fully under BSA recordkeeping and reporting requirements. The Proposal on Beneficial Ownership Information asks for comments on a rule requiring reporting by various entities of their beneficial owners. John and Elliot discuss some key points of both issuances and talk about the importance of making comments on these other regulatory proposals.
FinCEN Issues Several Proposals on Which You should Comment TRANSCRIPT
Elliot Berman: John, how are you today?
John Byrne: Hi Elliott. Doing great. My daughter, Melissa, had her wedding with family and friends last weekend because it was severely limited a year ago because of COVID. So we were very excited to be able to do that. So that was, it was a great time. And just back from that.
Elliot Berman: Always good to have good family events.
So while you were away, our good friends at the various regulatory agencies have been very busy trying to meet the year-end schedule for a bunch of regulations and other issuances. I think it would make sense to talk about the proposed rule on beneficial ownership information reporting.
Then the other one is an advanced notice of proposed rulemaking about how to bring more of the real estate business under the BSA. So I assume, even though you were away, that you had a chance to at least catch up on the fact that those have been issued.
John Byrne: Yeah. I think two things. They're trying to make year-end deadlines, also that those particular two topics that you mentioned are under the rubric of fighting corruption. There was a new report [on] US government strategy on countering corruption that talked about anonymous Shell companies [and] talked about real estate. These things were already obviously baked.
So the beneficial owner proposal takes a number of all the comments provided during the advance notice. It does a series of things on who must report the information when [and] what information they must provide, all of that. And you've got 60 days on this one.
The one thing I would mention besides everybody should walk through and read, you know, 55 plus pages because it's really essential as we always say to comment. But one of the things I would point out is a group that we're familiar with. We've actually talked to, on a number of occasions on some other issues, Transparency International.
They were very positive about the proposal. So if you go to their website, they talk about a number of things that they complimented treasury on doing, particularly some of the changes in timing. They talked about, you know, the rule does require entities to file the information in "a truly timely manner." I guess in their comment process; they focus on what goes on in France and Luxembourg that requires entities to update their information within 30 days of any changes. So the draft rule adopts that approach. So it says that a covered entity that changes beneficial ownership information has 30 days to file.
This is one of just many items in there, but I thought that was particularly interesting. They were not as happy about exemptions. They think the exemptions could be a loophole, a significant loophole. Still, I think a group like that, an advocacy group, like that being pretty complimentary on a proposal is, is sort of rare.
Cause like every group, they always seem to want more, but I was very impressed with the detail that they provided.
Elliot Berman: Yeah. That is interesting. It is a long proposal, in part because they do a comprehensive review of the groupings of comments they received and why they chose to make a change or not based on the comments, which is normal.
So you mentioned 60 days. I believe that takes us out to, and I think that would be like February 8th or so. So if you do want to get comments in, that's probably a January task for you. The advanced notice of proposed rulemaking on how to regulate real estate also is on 60 days. Also, well, your comments will be due that same day in February.
Basically, what's happening here is there's recognition that we in the US have been slow to really bring real estate under [the] AML CFT regime that was noted by FATF. I want to say in 2016, in their review of the US program, there is some reporting obligation of companies.
Usually, its title insurance companies tend to be the reporters for transactions in residential real estate. But there's nothing on the commercial side, so the proposal or at least the advanced notice sets out the problem is it does talk about a number of key areas, about which transactions should be covered and what information should be required in terms of both the record-keeping and reporting and then, asks for insights into the burden. Or burdens on the folks who would end up being the re-record keepers and reporters. We're going to publish on Tuesday a blog post that has more detail on this one.
I recommend this one for people to read as well. It [was] published this morning. Well, it actually published on Wednesday morning, when we're recording this, in the federal register, and it's a 14-page proposal. Because they haven't gotten any comments yet, so they don't have to recite all of that stuff.
John Byrne: Right. I mean, you know, again, advanced notice, but there's no question in my previous life with the Bankers Association during the Post 9/11 activity, the Patriot act. We pushed really hard to get real estate involved here, and it never resonated with policymakers, and that's been a big mistake.
So while that industry and those that advise that industry will have ample opportunity to comment on what can be considered "burdensome," you know, it's really time for the domestic real estate market to step up. So hopefully, there'll be a good give and take. But if you look in certain cities, the reason we have geographic targeting orders is because a property has been bought in cash by oligarchs, PEPs, you know, cartels, you name it. And we got to start figuring it out.
Elliot Berman: That's exactly right. They talk about the geographic targeting orders. Interestingly enough, when they go through kind of the history of the various looks and guidance that they have taken and issued, they actually refer to that period post 9/11 that you just referred to. Acknowledging that they looked very seriously at it but never issued regulations.
There isn't any real explanation on why they didn't. But they acknowledged that I guess I would agree with, I do agree with you, failed effort. You know, almost now, almost 20 years ago, that could have turned into something meaningful and the key loophole.
John Byrne: They blew it. I mean, there's no two ways about it. They blew it, and maybe it was hardcore lobbying, who knows, but, you know, now's a chance to make amends.
Elliot Berman: Correct. So, there were a couple of other things that were issued this week. One of which was some updates to the FFIEC examination manual, which you and I will try to talk about in the near future. And John, I think there was one other that you were mentioning.
John Byrne: Yeah, the treasury department has been involved in some anti-corruption dialogues and meetings. So there's been a number of reports and announcements issued from the treasury broadly dealing with corruption besides the report that I mentioned earlier.
So there's been some of that going back to the issue. On the manual, we will talk about that. I'm part of a stakeholder dialogue with humanitarian groups that are looking to potentially solve that problem because we've moved a bit, but we haven't solved it. So more to come on that, and we'll give you our quick take on, on how a manual change from a practical standpoint might impact our clients.
Elliot Berman: Okay. So, let's do our shameful ads. I'll do the first one. The first one is...
John Byrne: Shameless plug [laugh]. They're not shameful ads [laugh].
Elliot Berman: I beg your pardon? You're right. Shameless plugs[laugh]. If you like this and our other ones, you can find us on Spotify or Apple Podcasts or wherever you get your podcasts. Plus, we have lots of other great content on our website, and we have our last monthly webinar of the year coming.
John, why don't you talk about that?
John Byrne: Yes, it's taking a look back at 2021 and a preview of 2022 on anti-human trafficking issues. We have a great panel [and] a great moderator. Our colleague, Joe McNamara, will moderate. We're going to go into how the financial sector has to deal with this and policy issues and a view from academia. So I know you're going to get a lot out of it, and that's on the 16th at one o'clock Eastern Time.
Elliot Berman: Yes, go to our website, and you can register there, and then you'll get the link, and you can join us. We're already working on our 2022 schedule of webinars and, you'll start to see those advertised later in the month.
So, John, you have a great week, and we'll be back together next week, with another installment of this week in AML.
John Byrne: Take care of Elliot talk soon.
Elliot Berman: Bye-bye.