Articles Tagged with AML

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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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On June 29, 2017, the U.S. Treasury Department announced new steps applying pressure on North Korea in relation to its proliferation activities.  Specifically, this involved (1) sanctions designations against Chinese shipping company Dalian Global Unity Shipping Co., Ltd. and two Chinese individuals; and (2) anti-money laundering special measures against China’s Bank of Dandong.  All were involved in business with North Korea according to the Treasury Department’s announcement.

The Special Measures for Bank of Dandong under Section 311 of the USA PATRIOT Act prohibit U.S. financial institutions from maintaining correspondent accounts for, or on behalf of, that bank.  This would prevent access to the U.S. banking system for dollar transactions or wiring services.

None of the sanctioned parties appear to be systemically important companies for China, but the sanctions may be intended, or viewed, as an effort by the Trump Administration to pressure China into doing more to restrain North Korea’s nuclear activities.

 

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Policy makers in Europe continue to explore responses to the Panama Papers revelations and recent terrorist attacks. On 28 February, European law makers approved important amendments to the EU’s Anti-Money Laundering (AML) Directive, 2015/849 (the “Directive”) that would implement new rules to combat money-laundering, terrorism financing and tax evasion.

The amendments would include:

  • Expansion of AML obligations to trusts and certain virtual currency platforms;
  • Public access to registers of beneficial ownership information; and
  • Lower value thresholds for regulation of pre-paid instruments.

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On September 15, 2016, President Obama announced that U.S. economic sanctions on Myanmar (also known as Burma) would end, but the announcement left many questions as to what would change and what sanctions might remain. On October 7, the Obama Administration provided the answer with an Executive Order that completely removed the Burmese Sanctions Regulations, lifted the U.S. import ban on rubies and jadeites, made the public reporting requirements for investment voluntary, and lifted the bans on visas for certain sanctioned individuals and most sanctions listings of Burmese Specially Designated Nationals (SDNs).

The United States had been removing sanctions in steps since July 2012 as the Myanmar government moved down a path of reform. However, a patchwork of remaining sanctions and a broad set of sanctions listings continued to make business, investment, banking and trade with Myanmar challenging for U.S. as well as non-U.S. companies. Here are four key impacts of the U.S. policy change and four important issues that remain.

How does this removal of sanctions impact business in/with Myanmar?

1.  The sanctions list is nearly gone (see below for what remains). Importantly, this includes removals of (a) the major Myanmar economic conglomerates, businesses and banks; (b) military/economic entities; and (c) the remaining key businessmen, industrialists and military-related figures.

2.  Treasury’s Financial Crimes Enforcement Network (FinCEN) provided “exceptive relief” to the Special Measures imposed for anti-money laundering (AML) purposes under Section 311 of the USA PATRIOT Act. As a consequence, U.S. financial institutions continue to be authorized to provide correspondent banking services to Myanmar banks. Previously, U.S. financial institutions were permitted to provide correspondent services involving Myanmar transactions for non-SDN banks, although in practice U.S. banks have shied away.

3.  The ban on imports to the United States of Myanmar rubies and jadeites, as well as jewelry containing the same, has been completely removed.

4.  The State Department’s Responsible Investment Reporting Requirements for new investment over $5,000,000 (previously $500,000) has been removed, but reports can still be made on a voluntary basis.

What issues still remain for persons doing business in or related to Myanmar?

A.  Over thirty Burmese SDNs continue to be listed under drug trafficking and North Korea sanctions programs. This includes Yangon Air and several gem, mining, textile, agricultural and constructions companies. Thus, although business in Myanmar will be far less burdensome, some sanctioned-party risk remains.

B.  Myanmar banks will need to continue to integrate with the global financial system and establish U.S. correspondent banking relationships to allow dollar transactions. Myanmar’s government and financial system also will have to make continued progress to address FinCEN’s AML concerns. Whether the current FinCEN exception or Myanmar’s continuing reforms will be sufficient to encourage U.S. banks to expand their banking relationships with Myanmar remains to be seen.

C.  The U.S. embargo on exports to Myanmar of defense articles and defense services remains in place.

D.  Although all property and interests in property blocked under the Burmese Sanctions Regulations are now unblocked, the U.S. government made clear that past violations of U.S. sanctions are still subject to enforcement, including action against U.S. and non-U.S. persons who may have “jumped the gun” by conducting business prior to sanctions removal.

The lifting of sanctions for Myanmar marks a watershed in the unwinding of U.S. sanctions. Now, the U.S. and Myanmar governments will observe how the private sector reacts as Myanmar rebuilds and rejoins the international economy.

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On January 13, 2016 the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) issued Geographic Targeting Orders (GTOs) requiring reporting by title insurance companies and their subsidiaries and agents on certain high-value real estate transactions starting on March 1, 2016. The GTOs require reporting on “all-cash” residential real estate deals made through shell companies in Miami Dade County, Florida and the Borough of Manhattan in New York City.

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