PikeNet Dispatch, June 3, 2003
Vol 8 No. 43 (672), "More than 9,000 subscribers"

Financial Crimes Enforcement Network (FinCEN)

Real Estate Advances to the Frontline... How can we prevent terrorists and criminals from buying real estate? FinCEN, the Financial Crimes Enforcement Network (FinCEN), wants your comments before imposing regulations on "persons involved in real estate closings and settlements." Here's the root of FinCEN's concern. "Money launderers have used real estate transactions to attempt to disguise the illegal source of their proceeds. For example, narcotics traffickers have purchased property..." Uh-oh.

"Under the U.S.A. Patriot Act, signed into law in October 2001, a wide variety of financial institutions are now required to establish programs to make them more vigilant in detecting and reporting suspicious activity, whether terrorist-related or not." (New York Times, May 28, 2003) You'll probably be surprised to learn that almost any subscriber to the PikeNet Dispatch might be considered a financial institution. Yes, the Bank Secrecy Act (as modified by the Patriot Act) defines a "financial institution" very broadly as a person "involved in real estate closings," including brokers, attorneys, bankers, appraisers, escrow agents, and title insurance companies. Until now, real estate has been exempted from the Patriot Act.

According to the NYT article, possible new regulations have "drawn protests from many real estate professionals" concerned about regulatory burdens, which might, for example, require brokerage firms "to develop internal policies, procedures and controls; designate a compliance officer; provide training; and create an independent auditing system to test these programs." What do you think? Should we be concerned about terrorists acquiring real estate?

Spread the Word... Many thanks to the Mortgage Bankers Association of America, sponsors of this Dispatch. We could not provide this free service without sponsors (and kind readers like you!). If you would like to sponsor future issues, please send e-mail or call me at 415-485-6700.

--Peter Pike