Articles Posted in Anti-Money Laundering

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The Biden Administration has signaled an expanded commitment to longstanding U.S. anti-corruption policies, and recent enforcement actions and policy announcements provide insights into what foreign officials, companies and investors can expect. Early signs indicate an intent both to bolster core anti-corruption enforcement through the Foreign Corrupt Practices Act (FCPA) and anti-money laundering tools (see here), and to explore administrative tools such as targeted sanctions.

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On February 18, 2021, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) entered into a settlement of $507,375 with BitPay Inc. for violations of multiple U.S. sanctions programs. According to the settlement, BitPay allowed its platform to be used by persons in Cuba, North Korea, Iran, Sudan, Syria and the Crimea region to transact with merchants in the United States. The latest settlement is noteworthy for the involvement of a digital currency service provider and its discussion of OFAC’s expectations regarding compliance for companies in this growing financial and commercial sector.

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Over the past nine months, companies and governments have competed for goods and materials amidst scarcity and disrupted supply chains.  At the same time, governments, central banks, international organizations and NGOs have poured money into economies, hoping to provide relief, meet demand to procure essential goods, and find solutions to an unprecedented situation. This unprecedented environment has created legal risk for market participants, and the potential for a wave of enforcement in the future.

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As we’ve discussed previously, in 2018, the UK enacted the Sanctions and Anti-Money Laundering Act (the Act), allowing it to impose its own post-Brexit autonomous sanctions regime. On July 6, 2020, the UK imposed its first sanctions under the Act: the Global Human Rights Sanctions Regulations 2020 (the Regulations).

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On May 8, 2020, the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) reissued its Geographic Targeting Orders (GTOs) for 12 metropolitan areas.  These GTOs are identical to the November 2019 GTOs.  The GTOs require title companies and their subsidiaries and agents to collect and report information about certain residential real estate transactions in specified jurisdictions.  The terms of the orders are effective beginning May 10, 2020 and ending on November 5, 2020.

Pursuant to 31 U.S.C. § 5326(a), the Director of FinCEN has the authority to impose certain recordkeeping and reporting requirements on domestic financial institutions or nonfinancial trades or businesses in a geographic area where reasonable grounds exist to prevent money laundering.  These orders are only effective for up to 180 days, unless renewed.

The May 8 GTOs require title insurance companies and their subsidiaries and agents that are involved in a “covered transaction” to report the transaction to FinCEN within 30 days of the closing of the transaction.  The orders specifically apply to purchases of residential real property including individual units of condominiums and cooperatives by a corporation, limited liability company, partnership, or other similar business entity in the amount of $300,000 or more.  To be covered, the purchase must be made without a bank loan or other similar form of external financing.  Also, the purchase must be made, at least in part, using currency or a cashier’s check, a certified check, a traveler’s check, a personal check, a business check, a money order in any form, a funds transfer, or virtual currency.

For such transactions, title insurance companies and their subsidiaries and agents will have to identify and report natural persons who are the true “beneficial owners” behind shell companies acquiring the residential estates.  A beneficial owner is defined for purposes of the GTO as any individual who, directly or indirectly, owns 25 percent or more of the equity interests of the entity purchasing the real property.  Title insurance companies will have to obtain documentation identifying the “beneficial owners” (such as a copy of the passport or driver’s license) and retain the information obtained for five years and make it available to FinCEN or any other law enforcement authority when requested.

The order applies to the following jurisdictions: (1) the Texas counties of Bexar (San Antonio), Tarrant (Fort Worth), or Dallas; (2) the Florida counties of Miami-Dade, Broward, or Palm Beach; (3) the Boroughs of Brooklyn, Queens, Bronx, Staten Island, or Manhattan in New York City, New York; (4) the California counties of San Diego, Los Angeles, San Francisco, San Mateo, or Santa Clara; (5) the City and County of Honolulu in Hawaii; (6) the Nevada county of Clark (Las Vegas); (7) the Washington county of King (Seattle); (8) the Massachusetts counties of Suffolk, or Middlesex (Boston); or (9) the Illinois county of Cook (Chicago).

The title insurance company, and any of its officers, directors, employees, and agents, may be liable, without limitation, for civil or criminal penalties for violating the order.

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Background
On 23 May 2018, the Sanctions and Anti-Money Laundering Act became law in the United Kingdom. Its aim is to provide a legal framework to allow the UK to impose sanctions and implement its own sanctions regime once the UK leaves the EU on 29 March 2019. However, the Bill goes well beyond any current EU sanctions regime and provides scope for the Government to shape an autonomous UK sanctions policy.

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