What Anti-Money Laundering Program?

Many real estate professionals are required to implement customer identification and anti-money laundering compliance programs before May 2003. Title III of the October 26, 2001 USA Patriot Act, which was passed to facilitate the detection, prevention, and prosecution of international money laundering and the financing of terrorism, authorized the Secretary of the Treasury to promulgate additional customer identification and anti-money laundering regulations for businesses considered to be "Financial Institutions." The categories of business required to adopt customer identification and anti-money laundering compliance programs ("Compliance Programs") include not only banks and savings associations but also "persons engaged in real estate closings and settlements."

The Department of Treasury ("Treasury") and Financial Crimes Enforcement Network ("FinCEN") have already adopted Compliance Program regulations for many of the categories of Financial Institutions. The Compliance Program regulations that have been adopted thus far require that Compliance Programs be in writing and include, at minimum:

• a designated Compliance Officer;
• appropriate customer identification, document creation, filing, and retention procedures;
• employee training programs; and
• an independent audit function.

Treasury and FinCEN have temporarily deferred the obligation of certain Financial Institutions — including "persons engaged in real estate closings and settlements" — to implement Compliance Programs, to allow FinCEN time to draft and receive industry comments upon its proposed definitions and regulations for such Compliance Programs. Real estate professionals should diligently monitor the progress of proposed regulations, so that they can make comments to Treasury during the comment period, and promptly comply with all newly adopted regulations. FinCEN and Treasury anticipate that Compliance Program regulations will be adopted for all Financial Institutions by May 1, 2003.

The exact definition of "Persons Engaged in Real Estate Closings and Settlements" who will be required to implement Compliance Programs has not yet been determined. This category is extremely broad (and would apparently include at least real estate brokers, agents, title companies, and attorneys), but, based upon the rules issued for other types of Financial Institutions, FinCEN will most likely propose some limitations to the persons required to implement Compliance Programs.
  

For further information on this topic, please contact Beth Tiggelaar at beth.tiggelaar@strasburger.com.

     
STRASBURGER & PRICE, LLP  •  DISCLAIMER
Articles contained within this newsletter provide information on general legal issues and are not intended to provide advice on any specific legal matter. This information is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. Readers should not act upon this information without seeking professional counsel.