Federal anti-money laundering regulations incorporate RPPTL recommendations
While well-intended, some think the proposed requirements could delay some transactions, or add additional expense, without benefitting law enforcement
New federal anti-money laundering regulations released just before the Labor Day weekend include recommendations proposed by the Real Property, Probate and Trust Law Section, says former RPPTL section Chair Melissa Murphy.
The U.S. Treasury’s Financial Crimes Enforcement Network, or FinCEN, spent much of last year developing new reporting requirements for “non-financed real estate transfers,” citing a need to combat money laundering in the U.S. real estate market.
Murphy and other attorneys warned that while well-intended, some of the proposed requirements could delay some transactions, or add additional expense, without benefitting law enforcement.
“Several of the recommendations made by the Real Property, Probate and Trust Law Section (along with others) were incorporated into the new rule,” Murphy said. “Most notably, an exemption for gratuitous transfers from an individual, either alone or with their spouse, to a trust which the individual, that individual’s spouse, or both of them, are the settlor(s)/grantor(s).”
“Gratuitous transfers,” generally, are transfers of property where no money exchanges hands.
Regulators incorporated other RPPTL proposals, Murphy notes.
“Additionally, FinCEN clarified the exemption for transfers ‘resulting from the death of an individual’ to indicate that no reporting is required if the transfer is ‘pursuant to the terms of a decedent’s will or the terms of a trust, the operation of law or by contractual provision,’” Murphy said.
New reporting requirements regarding vacant property were also revised, another issue the RPPTL section comment addressed.
“The definition of ‘residential property’ was revised to include vacant land ‘on which the transferee intends to build’ a home,” Murphy said. “FinCEN removed any requirement to verify zoning or issuance of a building permit. FinCEN did not create a specific exemption for ‘corrective instruments’ but provided commentary that such instruments are ‘not transfers’ and are therefore not covered by the rule.”
The RPPTL section, which boasts some 11,000 members, was not alone in expressing concerns.
Murphy estimated that the section and more than 400 interested parties submitted comments to FinCEN by an April 14 deadline.