Real Estate and Mortgage Compliance

Individuals or companies involved in real estate transactions, ownership or management must bear in mind that the federal government has three regulatory tools in the war against terror:

1.        The Money Laundering Control Act (MLCA)

2.        The USA PATRIOT Act

3.        Executive Order 13224

The MLCA, a criminal statute, makes it illegal for any person or business that knows money or property is derived from an illegal activity to engage in a financial transaction involving the money or property. Penalties include jail terms and fines either of $500,000 or twice the property involved.

For the first time, The USA PATRIOT Act imposes anti-money laundering requirements on loan and finance companies, persons involved in real estate closings and settlements and insurance companies. Section 352 of the Act includes the anti-money laundering provisions for financial institutions. The term financial institutions includes loan and finance companies and persons involved in real estate settlements. Under the USA PATRIOT Act financial institutions are required to establish anti-money laundering (AML) programs and "Know Your Customer" procedures. In addition, they are obligated to report suspicious activity, including those by "persons engaged in real estate settlements and closings."

Executive Order 13224 prohibits all U.S. individuals and businesses from engaging in any form of financial transaction with persons or entities designated as terrorists or their associates. The Office of Foreign Assets Control (OFAC) maintains a list of “Specially Designated Nationals” (SDNs) that contains over 5,000 names of persons and organizations with which no U.S. individuals or firms may conduct business. Criminal violations of OFAC regulations can result in corporate and personal fines of up to $1 million per count as well as prison terms.

The Building Owners and Managers Association reports that law enforcement authorities believe real estate to be a prime target for money launderers. Consequently, real estate firms should establish AML programs as soon as possible.

The American Land Title Association notes the following "red flags" of possible money laundering:

• A prospective buyer pays for real estate with funds from a high-risk country
• A seller requests that the proceeds on the sale of real estate be sent to a high-risk country
• A person seeks to purchase real estate in the name of a nominee and has no apparent legitimate reason for doing so
• A person appears to be acting as an agent for an undisclosed party
• A prospective buyer or seller provides suspicious documentation to verify identity

ATTUS Technologies has been serving the needs of real estate-related companies since 1998. To request a demonstration or free trial of any of these solutions, call us at 1-888-494-8449.