In February, the Treasury Department's Financial Crimes Enforcement Network announced that it would issue money-laundering rules governing the real estate and insurance industries, among other sectors, later this year. Under the new regulations, real estate agents, mortgage brokers, and title companies will have to issue reports of any suspicious financial activity, much as banks have had to do for years. Builders who provide such services will also be bound by the regulations.
Associations for those in the real estate industry initially opposed the reporting rules because home sales usually do not involve cash, but former Internal Revenue Service investigator Steve Smith says such transactions can involve laundering if illegal money is deposited and used to close the deal. The reports made by each industry will be used to deter money launderers and terrorists under the USA Patriot Act, he said.
An assortment of laundering cases involving cashless transactions illustrates the need for expanded regulation. In a high-profile Miami case, the parents of a bribed drug jury foreman showed up at a closing to buy a vacation house that they had never seen. Their son had put $50,000 of his bribe money into the mother's bank account for the purchase. Smith suggested anyone involved in the closing could have helped investigators by reporting their suspicions, as banks are required to now.
“This is new for folks, and we recognize that,” said William Fox, the new director of the Treasury Department's Financial Crimes Enforcement Network, or Fincen. The financial reports will be analyzed by law enforcement to pursue criminals and prevent terrorism, said Fox.