Wealthy Russians subject to U.S. sanctions may try to evade them by investing in the U.S. commercial real estate market, the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) warned. The regulator urged U.S. banks to be vigilant, noting that the complex financing schemes and opaque partnership structures used in this market can help hide funds, writes The Wall Street Journal. FinCEN is the recipient of suspicious activity reports that financial institutions are required to file when they detect signals that a transaction is potentially illegal. The warning for banks issued by the regulator on Wednesday is another attempt by the U.S. Treasury Department to prevent wealthy Russian citizens from circumventing financial sanctions, the WSJ notes. “Thanks to international pressure and economic restrictions imposed on Russia by more than 30 countries, there are fewer and fewer opportunities for sanctioned Russian elites to move and hide their ill-gotten gains,” said Himamouli Das, acting head of FinCEN. The regulator outlined a number of signs and “red flags” that should alert banks. For example, sanctioned Russians may try to use investment pools or offshore funds to avoid inspections, he warned. Banks are usually not required to identify people who own less than 25% of shares in the funds. Thus, sanctioned individuals can reduce their stakes to avoid scrutiny while still retaining control of the fund, FinCEN says. They may use front companies and multi-level schemes involving multiple legal entities or trusts, as well as transfer assets to other family members or business partners to hide their involvement, the regulator warns. It notes that sanctioned individuals may not only invest in high-end and luxury real estate. In some cases, they may look for more discreet investments that provide a stable income without attracting unwanted attention. Using such strategies to evade sanctions is just as likely in small and mid-sized U.S. cities as it is in metropolitan areas, FinCEN notes. Last year, the regulator issued a similar warning to banks, advising them to pay close attention to transactions involving art, luxury yachts and jewelry.
FinCEN, INVESTMENTS, REAL ESTATE, US
