You may or may not have heard about the plan to crack down on real estate money laundering. Either way, we wanted to give you a quick breakdown so you can make sure you’re knowledgeable about the new expectations.
The U.S. Treasury Department will soon propose a rule that would close a legal loophole that allows criminals to hide their illegally acquired funds through anonymous luxury-home purchases. This rule aims to bring more transparency to real estate transactions, especially those involving cash payments.
Under this new rule, real estate professionals, including title insurers, will be required to report the identities of the beneficial owners of companies purchasing real estate in cash to the Treasury’s Financial Crimes Enforcement Network (FinCEN). This is meant to reveal the true owners behind these acquisitions and discourage illegal financial activities.
Money laundering has always been a problem that all of us in real estate have been expected to look out for. It’s estimated that as much as $2.3 billion was laundered through real estate transactions between 2015 and 2020, according to the U.S Treasury.
As a fellow real estate professional, there are several ways you can gauge risk and help prevent the act of money laundering, including:
- Understand the basics: Know the fundamentals of money laundering and the common techniques criminals use to quickly spot suspicious activity.
- Perform due diligence: Verify the identities of your buyers and sellers, checking their backgrounds and ensure they are who they claim to be.
- Be cautious of cash transactions or unusual payment methods: Of course, not every cash deal is a sign of nefarious activity, but be wary of any substantially large cash transactions or third-party payments.
Here’s a great resource that lists other red flags to look for, including geographic risk, customer risk and transaction risk.
Ultimately, this new rule is designed to protect the integrity of the real estate industry. In light of these regulatory changes, though, it’s increasingly important for Realtors to partner with title insurance companies that are well-versed and in full compliance with these new rules. Colorado Title & Closing Services, with our longstanding experience and commitment, is an ideal partner to ensure smooth and compliant real estate transactions.
If you have questions about this or are just looking for a partner in-the-know, then we’re the team for you. Reach out to us at coloradotitleservices.com today!