The Treasury Department’s Financial Crimes Enforcement Network has been flexing its muscles lately to remind everyone of its important role in money laundering enforcement. Jennifer Shasky, the current Director, a former prosecutor from the Department, knows how to get things done and she is certainly pushing a number of buttons.
In a recent speech, Shasky warned companies about illegal money laundering schemes involving real estate. In particular, she addressed the use of shell companies to purchase high-value real estate at the Time Warner Center in New York City. The New York Times recently reported about these transactions, and a coalition of non-profit organizations wrote to the Treasury Department urging the repeal of an exemption to the PATRIOT Act for real estate companies.
Real estate agents and brokers have been exempt from customer due diligence requirements for money laundering.
Shasky noted that international corrupt politicians often use shell companies to purchase real estate as a means to disguise illegal proceeds. Current BSA regulations do not apply to persons involved in real estate closings and settlements. Real estate transactions involving mortgages (bank or non-bank issued) are subject to BSA reporting requirements. FinCEN is likely to issue regulations covering cash real estate transactions in the near future, closing a loophole exploited by corrupt politicians and drug traffickers to hide illegal proceeds.
In a separate action, FinCEN recently issued a geographic targeting order applicable to 700 Miami businesses involved in the electronics exporting industry. FinCEN’s Order requires targeted businesses in certain Florida zip codes to submit a Form 8300 for all cash transactions over $3000. Typically, the Form 8300 applies to cash transactions over $10,000.
FinCEN took this unusual action to root out money laundering schemes connected to drug cartels, particularly those based in Mexico.
The record-keeping requirement is more expansive that current requirements, and requires businesses to secure additional identification from buyers and information on whether the buyer is purchasing the item for another person. FinCEN issued a similar order last year targeting Los Angeles’ garment district.
The broad application of the Florida order suggests that a number of companies may be unwittingly laundering proceeds of narcotics traffickers. The order is designed to provide these companies with additional tools and information to identify possible money laundering schemes.
The electronics industry, and in particular cell phones, has been a common area for drug trafficking organizations to launder proceeds since such equipment can be readily used to further the drug trafficking operation.
FinCEN’s Order was preceded by a number of forfeiture cases launched by the South Florida Money laundering Strike Force. Banks and financial institutions who provide service to exporting companies will be required to collect additional information and file paperwork notifying law enforcement of suspicious transactions involving electronic equipment.
Electronic equipment distributors will have to design and enhance existing compliance programs to ensure that employees are familiar with the new requirements and adhere to the specific obligations. The record-keeping requirements will be significant and companies will have to preserve such records for at least five years and ensure they are accessible.
