Biden’s Administration Announces New Timeline for AML Initiative and Beneficial Ownership Rules

FACT’s anti-money laundering efforts are updated in the Biden Administration’s Spring 2023 Regulatory Agenda. There is also a long-awaited draft rule on curbing money laundering in America’s real estate market and the second final rule implementing the CTA.

An updated version of the Biden Administration’s Spring 2023 Regulatory Agenda includes an update on FACT’s anti-money laundering efforts. Rather than releasing finalised legislative plan in September 2023, the Corporate Transparency Act (CTA) will publish a final rule governing access protocols in September 2023 – just months before reporting begins on January 1st, 2024. It is now anticipated that the upcoming real estate rule will be released in August and open for comments until October.

Several anti-corruption advocates have been frustrated by frequent delays in rulemaking processes for the CTA and new real estate transactional rules, despite being listed among the Administration’s top priorities in its 2021 Anti-Corruption Strategy. This slow regulatory pace can be attributed to the chronic under-resourcing of FinCEN, the Treasury department responsible for drafting new anti-money laundering regulations. FinCEN has not been able to meet a substantial regulatory agenda despite regular funding increases, despite the efforts of congressional champions and FACT and its allies.

The final access rule to implement the CTA is significant to the Administration’s wider anti-corruption agenda. Several critical deficiencies were identified by FACT in Treasury’s first draft of the rule, which noted that a failure to provide easy access to the beneficial ownership database of the CTA would “seriously impact the efficacy of the law as a whole.”

A fatally flawed form proposed by FinCEN for collecting beneficial ownership information is currently being reissued. By implementing the form as originally proposed, several statutory reporting requirements would have been rendered functionally optional. Financial Crimes Enforcement Network Identifies Real Estate Transaction Regulations as a “High Priority”

FACT member, Global Financial Integrity, released a report earlier this year entitled Acres of Money Laundering: How the U.S. Real Estate Market is a Kleptocrat’s Dream, describing how international criminals have used the U.S. real estate market to conceal their ill-gotten gains. FACT has repeatedly stressed that FinCEN’s upcoming rule on real estate will be important because an effective regime will cover both commercial and residential transactions. It is unclear whether a final rule will protect illicit investments in commercial real estate as a risk to the U.S. financial system. FinCEN itself has acknowledged such a risk.

The Federal Reserve Chair, Janet Yellen, testified in the House Financial Services Committee this week that “FinCEN is very actively working on those rules… I can’t give you exact timing, but it is a very high-priority item for FinCEN.”

Representative Emanuel Cleaver also expressed concerns about the efficacy of current Geographic Targeting Orders (GTO), the requirement that beneficial ownership be disclosed for all cash payments made in certain counties deemed to have significant money laundering activities. Secretary Yellen also addressed this issue. According to the Secretary, the real estate rule will be applicable nationwide, which addresses one of the key limitations of existing GTOs. A question posed by Representative Cleaver regarding whether the rule would include commercial real estate transactions still needs to be clarified by Yellen.

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