Real Estate & Banking Insiders May Benefit from Blowing the Whistle on Real Estate Money Laundering

Money laundering is an ever-expanding threat and the real estate industry as a catalyst  for laundering money has largely gone unchecked. With billions of dollars each year laundered and the high price for real estate as an asset, a great deal of concealed cash flows to real estate projects and purchases disguising the source of the funds and thus making the transactions look “clean” through the laundering.

In fact, hundreds of millions of dollars are estimated to flow from prohibited sanctioned counties into the real estate market  using bogus corporations, straw purchasers and other techniques to hide the origin of the funds. The financial and real estate entities who fail to know your client (KYC) may potentially be held liable under the revamped Anti-Money Laundering Laws, with whistleblowers receiving up to 30% of what the government recovers.

That’s millions for insiders that blow the whistle the right way.  In February 2024, FinCen issued a bulleting that it wants to hold bad actors accountable for real estate schemes that launder money, and knowing the government, they want to make splash with their first case, so the bigger the scheme the more likely to engage the attention of the authorities especially if you use an established anti-money laundering firm like Brown, LLC, with several DOJ alumni and hundreds of millions of dollars of results in the whistleblower space, especially the False Claims Act. Best of all, with one of the best whistleblower law firms, you can potentially act as an AML whistleblower and stay anonymous from start to finish.

Potential Occupations of Whistleblower Insiders in the Real Estate Industry

If you’re in one of the following occupations, it’s conceivable you might have insider knowledge meeting of a money laundering scheme or the failure to properly supervise transactions:

• Brokers
• Real estate agents
• Realty assistants
• Leasing agents
• Property managers
• Landlords
• House flippers
• Wholesalers
• Real estate syndicators
• Real estate developers
• Mortgage loan officers
• Account executives
• Mortgage processor/underwriters
• Mortgage brokers
• Hard money lenders
• Real estate appraisers
• Home inspectors
• Title officers
• Bankers

Know Your Customer (KYC) Requirements

The Treasury Department’s Financial Crimes Enforcement Network (FinCEN) recently proposed a regulation  that would require real estate professionals to report information to the agency about non-financed sales of residential real estate to legal entities, trusts and shell companies.

All-cash purchases of residential real estate are considered high risk for money laundering. The rule would not require the reporting of sales to individuals. Failure of a financial entity to file the rule could trigger and AML-KYC whistleblower case.

According to the director of FinCEN, criminals are exploiting residential real estate to launder and conceal profits from crime under a veil of anonymity, which subsequently leads to higher housing prices for the law-abiding majority. She went on to say the proposed rule is crucial for curbing abuses in US residential real estate and increasing protection for not only economic, but also national security.

Real estate is commonly utilized for money laundering due to unclear reporting rules for purchases that might leave avenues open for exploitation.[1] According to FinCEN, “the rule will increase transparency, limit the ability of illicit actors to anonymously launder illicit proceeds through the American housing market, and bolster law enforcement investigative efforts.”[2]

Potential Examples of Money Laundering in the Real Estate Industry

• Under or overvaluing property with the assistance of colluding forces
• The establishment of shell companies to purchase properties depending on origin of the funds and context)
• Using cash or alternative forms of financing that lack transparency, such as cryptocurrency
• Selling properties to accomplices/co-conspirators
• The use of multiple banks by investors to stay under reporting thresholds
• Conducting sales in cash without the involvement of mortgage lenders
• Investors buying properties geographically far from where they’re located
• Purchasing properties using “loan back,” which entails depositing money in offshore bank accounts and borrowed back by a shell company, that is owned by the person who controls the offshore bank account
• Using properties as physical bases for other criminal activities, including the subletting of the property[3]

Impact of Money Laundering on Real Estate

Money Laundering can do much harm to society at large and the economy, in addition to the real estate industry. It can lead to inflation of property prices, rendering it impossible for many to afford to alternatively purchase or rent residential or commercial real estate. The practice also contributes to corruption, unfair competition, instability, and the proliferation of drugs, human trafficking, terrorism, and overall organized crime, so it has a far-reaching impact.[3]

AML Whistleblower Program

The Anti-Money Laundering Act (AMLA) was passed in 2021 and established the AML Whistleblower Program. The AML Whistleblower Program is run by the FINCEN Bureau under the US Department of the Treasury. The program was modeled on the notably successful SEC Whistleblower Program, which has paid out more than $1.3 billion to whistleblowers. The AMLA was subsequently strengthened by Congress in December 2022 and signed into law by the President later that same month, demonstrating that it’s a priority to combat money laundering, and make sure those individuals who stick their necks out to do the right thing will be fairly compensated for doing so.

The new and improved version of the law establishes a minimum of 10% of the recovered funds to be allotted to the relator (another name for whistleblower) in a successful enforcement action. To be viable under the AML, judicial or administrative actions brought under the Bank Secrecy Act must exceed $1,000,000. After the improvement of the AML program, violations of the following statutes can also be brought under the AML program:

• the International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.);
• sections 5 and 12 of the Trading with the Enemy Act (50 U.S.C. 4305; 4312); or
• the Foreign Narcotics Kingpin Designation Act (21 U.S.C. 1901 et seq.).[4]

Qualifications for an AML Whistleblower Reward

• The whistleblower must voluntarily provide original information to their employer, Treasury, or the Department of Justice.
• It should be noted that foreign nationals are eligible for rewards, as US citizenship is not a prerequisite for award eligibility.
• There is no limitation on award eligibility for whistleblowers who gain information through the performance of compliance or audit job duties as opposed to other programs such as the SEC Whistleblower Program.
• The fraud should exceed $1,000,000 for FINCEN to give it a close look, as resources and manpower can be limited, and the government is naturally going to prioritize going after the biggest perpetrators.
• The greater the significance of the information provided by the whistleblower, and the greater they cooperate with the government, the more likely it is that the whistleblower can stand to receive a larger potential reward.[4]

Protections Against Retaliation

• Anonymity – with an AML whistleblower law firm you can potentially remain anonymous from start to finish.
• Under the AMLA, whistleblowers are entitled to a private right of action if they have suffered retaliation for disclosing any potential Bank Secrecy Act Violations to the Departments of Treasury or Justice, law enforcement agencies, regulatory agencies, congress, or an individual with supervisory authority over the whistleblower.
• The AMLA also protects a whistleblower for assisting in any investigations or judicial or administrative actions pertaining to the information they’re provided to the government.
• An AML whistleblower who is successful in a retaliation claim can win reinstatement, double back pay with interest, uncapped compensatory damages, reasonable attorney fees and any other remedies deemed appropriate.
• Even if a potential violation was not reported to the correct regulatory authority, a whistleblower may still be protected.
• Additionally, if the whistleblower does not meet the award threshold, they can still be protected from retaliation as well.
• A wide range of retaliatory acts are prohibited under the AMLA, including but not limited to indirect discharge, demotion, suspension, threats, blacklisting, harassment against a whistleblower in response to their whistleblowing in the scope of their employment.
• AMLA retaliation claims need to initially be filed with the Occupational Safety and Health Administration (OSHA), and 180 days after filing, the claim can be moved to federal court and tried before a jury if desired.[4]

AML Whistleblower Law Firms

If you’re a real estate professional, and aware of  money laundering, it is highly recommended to consult with an AML whistleblower law firm. They can advise you on how to protect your rights, assist you in going through the proper channels in filing a whistleblower and/or retaliation claim, and simplify the process for you so you can rest easy that you have seasoned legal representation navigating the dense weeds of AML whistleblower law for you and can help amplify the chances for  the best outcome possible. Act quickly to protect your rights by contacting an AML whistleblower law firm, so you can decide on the best course of action.

[1] Treasury rolls out residential real estate transparency rules to combat money laundering | AP News

[2] FinCEN Issues Final Rules to Safeguard Residential Real Estate, Investment Adviser Sectors from Illicit Finance | FinCEN.gov

[3] Understanding money laundering in real estate (complyadvantage.com)

[4] How Do Whistleblower Get Awards for Reporting AMLA Violations? (natlawreview.com)