The Financial Crimes Enforcement Network today issued an alert to financial institutions on potential attempts by Russian elites to evade sanctions through the U.S. commercial real estate sector. The alert lists potential red flags and typologies involving attempted sanctions evasion. It also reminds financial institutions of their Bank Secrecy Act reporting obligations and, for banks, their customer due diligence obligations.
According to the alert, potential sanctions evasion methods include pooled investment vehicles such as offshore funds; shell companies and trusts; third parties who invest on behalf of sanctioned individuals; and investment in CRE projects that are unlikely to draw public attention but generate stable returns.
The alert noted that banks frequently work with market participants who seek financing for CRE projects, and that banks have CDD obligations to verify the beneficial owners of legal entity customers. “Banks therefore may be in a position to identify and report suspicious activities associated with sanctioned Russian elites and their proxies, including (politically exposed persons), among banks’ CRE-related customers,” according to the alert.