The Week Of: November 11, 2019

This week’s news and stories of interest to the AML community. If you prefer a news roundup sent to you, subscribe to our weekly newsletter.

Closing the door on opening the books

New York state tax officials last week closed a loophole that could have revealed the identities of rich buyers who use shell companies to purchase luxury condominiums in New York City.

The loophole was the result of a law passed in September that targeted nearby Rockland County where homeowners suspected neighbors were using LLCs to illegally subdivide homes. Real estate industry insiders feared it could be interpreted to force anonymous condo purchasers in New York City, such as celebrities and the ultra-rich, to disclose their names and addresses.

The state Department of Taxation and Finance issued guidance clarifying that the law was intended to “apply to sales of a residential building with 1 to 4 dwellings, not the sale of individual condo units[.]” Read more from Curbed.

The guidance stands in contrast to a bill recently passed by the U.S. House of Representatives in October. The Corporate Transparency Act would require corporations and LLCs to reveal their ultimate beneficial owners to the federal government. It awaits a vote in the Senate.

In other steps taken by the federal government to increase transparency in the industry, the Financial Crimes Enforcement Network announced an extension of its investigation into whether wealthy foreign buyers are using shell companies to buy luxury real estate in all-cash deals. FinCEN’s initial investigation began nearly four years ago and focused on high-end deals in Manhattan and Miami. It has since expanded to include 12 U.S. cities.

Luxury goods and the Fifth Anti-Money Laundering Directive

A recent report by Transparency International highlighted how criminals use the U.K. to invest corrupt wealth into luxury property, yachts, jets and art, to the tune of at least £17.6 million over the last 30 years.

As a result, the scope of regulations over the luxury goods market under the Fifth Anti-Money Laundering Directive (5MLD) has been expanded. Art intermediaries must comply with Money Laundering Regulations 2017 for transactions of €10,000 for all forms of payments, not just cash.

In addition, customers paying for goods with pre-paid cards must be subjected to identity checks for transactions over €150 made directly in a shop or €50 or above made online, and enhanced due diligence measures are required for transactions involving high-risk countries such as Iran.

Read more at Farrer & Co.

FinCEN designates Iran as ‘primary money laundering concern’

The U.S. Financial Crimes Enforcement Network (FinCEN) recently issued a final rule designating Iran as a primary money laundering concern pursuant to Section 311 of the USA PATRIOT Act.

The ruling requires financial institutions in the U.S. to implement safeguards that will prevent the use of correspondent bank accounts on behalf of Iranian FI’s and prohibits the processing of transactions involving Iranian banks.

The U.S. government accused Iran of using humanitarian trade to evade sanctions in order to launder money and facilitate terrorism abroad. It therefore created a mechanism to provide transparency by requiring FI’s to conduct enhanced due diligence “to mitigate the higher risks associated with transactions involving Iran,” according to a Treasury Department release.

The American Bankers Association has more.