Anti-money laundering reform needs more Republican support: Sen. Grassley

The measures, which aim to prevent illicit financial transactions, are stalling in Congress

Sen. Charles Grassley after the Senate Policy luncheons in the Capitol on July 10, 2018 (Credit: Getty Images)


As the Treasury Department increases its efforts to crackdown on money laundering in real estate, legislation that would force shell companies to disclose their true ownership is stalling in Congress.

“All I can say is I’ve been working on this for four years,” Sen. Chuck Grassley (R-IA) told The Real Deal on Wednesday. “I need more Republicans. I think all but one Democrat would support it.”

There are two bills, one in each the House and Senate, that attempt to increase transparency in possibly illicit financial transactions — a move that directly affects many real estate purchases across the country. Federal authorities are cracking down on the millions of dollars in suspicious funds that reportedly flow through major U.S. real markets by way of limited liability companies, whose true owners are shielded from public view.

Last month, a bill sponsored by House Republican members Steven Pearce (R-NM) and Blaine Luetkemeyer (R-MO) was modified to exclude a clause that would force LLCs to report their beneficial owners. The updated bill, first introduced last November, would also raise the threshold for financial institutions to file suspicious activity reports to $30,000 from $10,000. When contacted by The Real Deal, press officers for the two congressmen asked for written questions. They did not respond before publication.

Changes to the House bill that nixed real owner disclosure requirements prompted swift rebuke from Democrats, including New York Rep. Carolyn Maloney, who told Quartz last month the move was “an abdication of duty.”

A second bill, introduced by Grassley in the Senate last year, seeks to criminalize concealment of beneficial owners by banks. It has also stagnated amid lobbying from the financial sector.

Grassley said that the bill has especially faced strong pushback from Delaware lobbyists — the state where many limited liability companies are incorporated — and from secretaries of states who say the requirement would be burdensome.

“[Secretaries of state] say that it’s going to be a workload that they can’t handle, which I think is a bunch of propaganda,” he said. “I don’t accept that argument.”

Democratic Sen. Dick Durbin echoed Grassley’s sentiment that there is “public value to disclosure.”

“If massive amounts of monies are being laundered through the United States through the real estate market, shame on us,” Durbin said.

Several finance, real estate and conservative advocacy groups have lobbied congress and the Treasury Department on beneficial ownership issues. They include the National Association of Realtors, the US Chamber of Commerce, the Consumer Bankers Association, and the Koch Brothers-founded FreedomWorks, the latter of which has called efforts to require LLCs to report their beneficial owners “garbage.” (NAR and CBA, however, have both expressed support for more LLC disclosure.)

Meanwhile, the Treasury’s Financial Crime Enforcement Network (FinCEN) is expanding its geographic targeting order program. The rule requires title insurance companies to identify the beneficial ownership of shell companies seeking to purchase homes with cash. It applies to deals above $3 million in Manhattan and over $1 million in Miami-Dade and ten other counties in Florida, California and Texas.

Economists at the Federal Reserve Bank of New York and the University of Miami found that since the rule was introduced in March 2016, companies spending all cash to buy homes plummeted. In Miami, it fell 95 percent.

A 2016 rule already requires banks and other financial institutions to disclose account owners, which Treasury Secretary Steve Mnuchin recently said he is willing to reform.

David Jeans and Adam Piore reported from Washington, Will Parker reported from New York.


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