FinCEN warned financial institutions to be cautious of potential investments in the U.S. commercial real estate sector by sanctioned Russian elites and their proxies.
In its Alert, FinCEN said that sanctioned Russian entities are attempting to use the commercial real estate market to hide illicit funds and store large amounts of wealth while also generating income. FinCEN said that the sanctioned individuals are relying on the highly complex financing methods and opaque ownership structures involved in commercial real estate transactions to conceal their transactions. FinCEN warned that sanctioned individuals seeking to evade sanctions may use (i) pooled investment vehicles, (ii) shell companies and trusts or (iii) third-party investors. Further, FinCEN said that individuals may seek investments in inconspicuous real estate projects that can provide stable returns, but are not likely to draw media attention. FinCEN said that there are no central geographic hubs where sanctioned individuals are focusing their commercial real estate investments.
FinCEN reminded banks, insurance companies, and other financial institutions to conduct thorough due diligence in compliance with its BSA obligations, and urged any institution that suspects that a sanctions violation occurred to file a suspicious activity report with FinCEN as soon as practicable. FinCEN also provided a list of red flags that financial institutions should consider as part of their risk-based approach to compliance.
