U.S. and UK risk assessments differ on real estate-related AML
Monday, November 23, 2015 at 10:28AM
Alex Zerden and Sarah Freuden in David Cameron, National Risk Assessment, USA PATRIOT ACT, United Kingdom, money laundering

The United States and United Kingdom recently published comprehensive money laundering risk assessments through the UK’s National Risk Assessment and the U.S.’s National Money Laundering Risk Assessment.

The UK’s National Risk Assessment (NRA) and U.S.’s National Money Laundering Risk Assessment (NMLRA) provide insight into anti-money laundering vulnerabilities from real estate in two of the five largest global economies.

Experts have recognized the real estate industry as a source of AML risks for decades. Recently, however, the AML threat has begun to receive attention in widely available public media as well. Coverage has included a five-part New York Times series in February on high-end New York real estate, sustained coverage by UK newspapers, advocacy campaigns from organizations like Global Witness and Transparency International, and posts in the FCPA Blog

In July, British Prime Minister David Cameron spoke out strongly against dirty money, stating: “London is not a place to stash your dodgy cash.”

The U.S. and UK risk assessments both address AML risks posed by real estate transactions. But the assessments took different approaches to this topic.

The UK’s NRA directly addressed the AML vulnerabilities presented by the real estate industry, examining the role of complicit and negligent real estate professionals, the low level of compliance with AML standards, and the lack of sufficient legal authority for government enforcement. It also described the longstanding AML obligations applicable to real estate agents within the United Kingdom.

In contrast, the U.S NMLRA did not contain a section on real estate. Although  for years some U.S. legislators and civil society organizations have urged the United States to close “temporary” exemptions to AML obligations for real estate imposed by the 2001 USA PATRIOT Act, the NMLRA did not discuss the issue.

The U.S. assessment did, however, describe several cases where real estate was involved in a money laundering prosecution, and it also addressed shell companies as well as the issues of nominees and the misuse of legal entities for illicit purposes. And although not noted in the reports, the U.S. Department of Justice has been aggressive in pursuing kleptocracy-related assets in the United States, including real estate properties.

Limited action by New York City on shell company disclosure is also a step in the right direction, but falls short of requiring beneficial ownership information or compensating for the federal-level regulatory loophole.

Building on these risk assessments as well as recent commitments through the G-20, the United States and United Kingdom are well positioned to champion meaningful reforms by addressing the AML and corruption risks posed by real estate transactions.
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Alex Zerden is the founder and principal of Toccoa Strategies LLC, an international risk advisory company.

Sarah Freuden is an attorney and advisor to Toccoa Strategies.

Follow them on Twitter at @AlexZerden and @SarahFreuden.

Article originally appeared on The FCPA Blog (https://www.fcpablog.com/).
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