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Harry Cassin
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Bill Waite
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Shruti J. Shah
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Eric Carlson
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Groups urge KYC rules for real estate to fight money laundering

Shruti Shah of TI-USA (Image courtesy of C-Span)Transparency International-USA sent a letter to the U.S. Treasury Department Tuesday, endorsed by 17 civil society groups, asking for due diligence requirements for professionals in the real estate sector.

TI-USA said millions of dollars are spent in the United States on luxury property by people who hide behind anonymous companies.

U.S. law doesn’t require the real estate industry to carry out background checks on the source of purchase funds or determine ultimate (“beneficial”) owners. Real estate still falls under a 2002 temporary exemption from the PATRIOT Act requirement for anti-money laundering programs.

“Many of the individuals behind these anonymous companies are wealthy foreigners, currently under investigation for corruption and other crimes, but did not have to declare how they acquired the funds to buy the property,” TI-USA said.

The letter also asked for enhanced due diligence by financial institutions of all customers, not just individuals.

Shruti Shah, a contributing editor of the FCPA Blog and the vice president for programs and operations at TI-USA, said:

Buying real estate with the proceeds of corruption is unacceptable and it is imperative that the intermediaries in these transactions — real estate brokers in particular — check where money for these purchases comes from and that shell companies are not used to complete these shady deals.

TI-USA said the effects of anonymous companies go far beyond hiding the ultimate owners of Manhattan’s real estate. Anonymous companies allow corrupt politicians and organized crime to transfer and hide illicitly acquired funds worldwide, and fuel an abuse of power and a culture of impunity, it said.

The letter went to Jennifer Shasky Calvery, director of the Treasury’s Financial Crimes Enforcement Network, or FinCEN.

Among the organizations that endorsed the letter were the Center for Effective Government, Citizens for Responsibility and Ethics in Washington (CREW), Financial Accountability and Corporate Transparency (FACT) Coalition, Global Financial Integrity, Global Integrity, Global Witness, Government Accountability Project (GAP),, Oxfam America, Tax Justice Network USA, and U.S. Public Interest Research Group (PIRG).

A copy of TI-USA’s March 10, 2015 letter is here (pdf).


Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.

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1 Comment

  1. While there is no mandatory due diligence required of real estate companies in the US many publicly listed firms like my own (JLL) carry out AML checks or recommend that our client do. If the seller declines to check where the funds are coming from should it be the broker's responsibility? A challenging question.

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