Bulletin: SLS2022006

Dear Associates:

The Financial Crimes Enforcement Network (FinCEN) is issuing a second alert on the importance of identifying and quickly reporting suspicious transactions involving real estate and other high-value assets of sanctioned Russian elites and their family members and those through which they act (collectively, “sanctioned Russian elites and their proxies”). This alert provides select red flags to assist financial institutions in identifying suspicious transactions, and reminds financial institutions of their Bank Secrecy Act (BSA) reporting obligations. Please  click here to view the alert in full.

On March 1, 2022, the President announced the U.S. Government’s intent to identify and freeze the assets of sanctioned Russian elites and family members, including their yachts, luxury apartments, money, and other ill-gotten gains. Additionally, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued a new round of sanctions targeting Russian and Kremlin elites.

Sanctioned Russian elites and their proxies may seek to evade sanctions through: (1) the purchase and sale of commercial or high-end residential real estate; (2) purchasing or maintaining real estate through shell companies or trusts, possibly using funds or assets held in offshore jurisdictions, or may liquidate real estate owned in countries with sanctions against Russia and its elites. Per the FinCEN alert, be on the lookout for the following red flags:

FinCEN Red Flags:

1. The purchase, sale, donation, or legal ownership transfer of high-value real estate in the name of a foreign legal entity, shell company, or trust, especially if the transaction: (i) is far above or below fair market value, (ii) involves all-cash transfers, or (iii) is funded by a third party with a known nexus to sanctioned Russian elites and their proxies.
   
   
2. The use of legal entities or arrangements that may have a nexus to sanctioned Russian elites and their proxies to hide the ultimate beneficiary or the origins or source of the funds.
   
   
3. Changes, without an apparent business reason, to the transaction patterns of a firm located in a country other than the United States, Russia, Belarus, and Ukraine, where the new transactions involve convertible virtual currency and Russian-related investments or firms.
   
   
4. A Russian individual or entity requests a wire transfer from a non-U.S. (particularly non- Russian) bank to pay for an all-cash purchase, especially if the wired funds come from an account held by an individual or entity other than the original requestor.
   
   
5. The dilution of equitable interest held in real property by sanctioned Russian elites and their proxies, by the addition of, or the transfer of real estate to, an individual not affiliated with the buyer or seller.
   
   
6. The maintenance, purchase, or termination of real estate insurance by persons with a known nexus to sanctioned Russian elites and their proxies.

FinCEN issued renewed and expanded Geographic Targeting Order (GTO) requirements in high-risk U.S. locations that often see significant real estate money laundering activity. Stewart’s related bulletin is available in the reference section, below.

If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter.

For on-line viewing of this and other bulletins, please log onto www.vuwriter.com.