BOMA Position
Building owners and managers must understand their new responsibilities to screen for terrorists and other criminals in today’s post-9/11 world.
Background
On September 11, 2001, three of the most well-known office buildings in the world were the targets of ruthless terrorist attacks. In the immediate aftermath, Congress passed the “Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act” (USA PATRIOT Act), which requires certain anti-money laundering compliance activities. In addition, President Bush issued Executive Order 13224, prohibiting all U.S. individuals and businesses from engaging in any kind of financial transaction with persons or entities designated as terrorists or their associates. These two new laws, in conjunction with the Money Laundering Control Act, mandate that companies and individuals involved in virtually every aspect of the real estate industry be on the lookout for terrorism and other illegal activity tied to real estate in which they have an interest.
The Money Laundering Control Act (MLCA). Generally, the MLCA makes it illegal for any person or business that “knows” money or property is derived from “some” illegal activity to engage in a financial transaction involving that money or property if the money or property did, in fact, come from a “specified unlawful activity.” The penalties include jail terms of up to 20 years and substantial fines of either $500,000 or twice the value of the property involved, whichever is greater. Knowledge that the money or property came from “some” illegal activity can be established if the party charged is found to have deliberately ignored facts or circumstances which would raise questions for a reasonable person about the source of the money or property.
The USA PATRIOT Act. This law requires financial institutions to establish formal anti-money laundering programs, "Know Your Customer" procedures and suspicious activity reporting. Included among the different classes of “financial institutions” are "persons engaged in real estate settlements and closings."
Though regulations have not yet been promulgated for our industry, the Treasury Department is empowered to require real estate entities to establish formal written anti-money laundering (AML) programs, appoint AML compliance officers, educate employees about AML procedures, and periodically check the AML program to ensure it is working. AML requirements can also include procedures for obtaining documentation of the identity of customers and checking customers against government lists of terrorists. AML rules can also require that regulated businesses report “suspicious activity” to the government. AML programs must, as a practical matter, include "Know Your Customer" (or “KYC”) procedures to enable employees and businesses to know who their customers are and to identify money laundering and other “suspicious activity.”
Executive Order 13224. All U.S. individuals and businesses are prohibited from engaging in any kind of transaction with persons, groups or entities designated as terrorists or as their supporters or associates. A list of “Specially Designated Nationals” (SDN's), consisting of “drug kingpins,” terrorists and others considered a danger to the United States, is kept by the Treasury Department’s Office of Foreign Assets Control (OFAC). Known as the “OFAC List” or the “SDN List,” it contains over 5,000 names and is updated often. No individual or business in the U.S., or the foreign subsidiaries of U.S. companies, may conduct any kind of business with anyone on the OFAC list, and companies are expected to keep track of all changes. It can be found on the Treasury Department's website at www.treas.gov/offices/eotffc/ofac/sdn/index.html.
Criminal violations of the OFAC regulations can result in corporate and personal fines of up to $1 million per count and, in the case of individuals, a maximum of 10 to 12 years in jail per count. Civil fines can range from $11,000 to $275,000 per count.
Action Requested
There are steps BOMA International members can and should take to ensure compliance and enhance the safety of your tenants, employees, and buildings.
- Include in all contracts certain terms, conditions, representations and warranties that require the person or business you are contracting with to perform basic anti-money laundering procedures. While this makes good business sense, keep in mind that there is no rule that says a business may rely on the anti-money laundering efforts of others.
- The Money Laundering Control Act and OFAC List regulations are already in effect and it is clear to law enforcement authorities that real estate is a prime target for money launderers. It is advisable for companies involved in the real estate industry to establish AML programs as soon as possible.
- The fastest and most efficient way to check names on the OFAC SDN List is through a reliable computer software system that is integrated into carefully designed compliance procedures. Check every name possible. Do not check only certain types (or stereotypes) of persons or businesses; terrorists and other prohibited parties come from all countries, are members of every religious group, and include all races, cultures and ethnicities.
- Document activities. If questions later arise, this will make it easy to retrieve information that supports your compliance activities.