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Published by the CIPS Network of the National Association of REALTORS®
Third Quarter 2008
ICREA Represents Real Estate Sector with Global Taskforce
By Carol S. Weinrich
September 11, 2001 changed a lot in our world—particularly for those in the United States. Some changes are minor inconveniences—
removing our shoes at airport security—while other changes are having a more significant impact. Many countries, including the U.S., began
to take a much harder look at sources of terrorist funding, among them money laundering. Financial sectors were examined and, through
the enactment and implementation of the Patriot Act and its revisions to the Bank Secrecy Act, the U.S. strengthened its Anti-Money Laundering/
Counter-Terrorist Financing (AML/CTF) legislation.
AML/CTF legislation around the globe is largely being shaped by the work of the Financial Action Task Force (FATF), an inter-governmental
policy-making body created in 1989. The purpose of the FATF is to develop and promote national and international policies to combat money
laundering and terrorist financing. The U.S. joined the FATF in 1990. FATF passed 40 recommendations in the late 1990s, providing a set of
countermeasures to money laundering. Nine more recommendations directed at terrorist financing were passed after 9-11, and 34 member
countries, including the United States have voted to adopt these 49 recommendations. FATF is now preparing to issue guidance on a “risk based
approach” to AML/CTF in the real estate sector, putting forward requirements for the real estate professional to help detect and report suspicious
activity that may involve money laundering or terrorist financing within the context of a property transaction.
Many governments, including the European Union and Canada, have already written stringent regulations directed at the real estate sector to
prevent money laundering and terrorist financing activities.The president of the Canadian Real Estate Association (CREA) reported to NAR’s
Executive Committee in May on its efforts to oppose recent Canadian regulations at that time aimed specifically at the real estate sector and
that were deemed by CREA as “impossible to comply with.” CREA sent 300 political affairs representatives to Parliament in May to voice industry
concerns and also met with the Minister of Finance.That effort paid off with the Canadian government indicating its willingness to change
some of the more impractical regulations. Several points are still being negotiated as the Canadian government prepares to begin enforcement
of real estate-related regulations.
To date, although the U.S. government has not focused strong attention on implementing the FATF
guidelines with respect to the real estate industry, but having observed governmental action in other
markets, NAR is engaged, through ICREA, in shaping the guidance directed at the real estate sector. FATF
approached ICREA in 2007, requesting that it represent the interests of the real estate sector on a global
level. Since then, ICREA has actively been working with FATF on guidance designed to assist FATF-member states in shaping and implementing
national legislation for the industry on AML/CTF. A final draft of the real estate guidance was approved by the FATF member states in June and
is being distributed to its member states.
Ultimately, each member state will determine its legislative and regulatory response to FATF’s recommendations. In the U. S., the Department
of the Treasury will likely be responsible for implementing the FATF guidance and will work with NAR and other organizations to understand
how the industry functions and how best to regulate real estate agents and brokers in line with FATF’s guidance.
In the EU and Canada, real estate brokers are currently held—by industry standards—to an even higher level of accountability than proposed
by the FATF guidance. ICREA hopes that the FATF guidance will assist these countries in advocating for a change in the regulations more aligned
with FATF requirements.Also, ICREA believes the guidance will be useful in countries where no national legislation has yet been enacted and
where industry trade groups can present the guidance as an FATF-endorsed global best practice.
As for U.S. activity, NAR will continue to closely monitor FATF developments and work with the U.S.Treasury Department to take an appropriate
role in combating money-laundering and terrorist financing. Current guiding regulations are enforced by the U.S. Treasury’s Office of
Foreign Assets Control (OFAC), which prohibit U.S. businesses from engaging in transactions with certain individuals and entities that have been
designated as terrorists, narcotics kingpins, etc.These regulations are of particular importance to you as a CIPS Network member because they
relate directly to foreign nationals engaging in real estate transactions within the U.S. or using U.S. businesses to conduct such transactions
elsewhere. gp
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