Anti-Terrorism and US Real Estate Lending

Executive Order 13224 is intended to inhibit terrorist activity by blocking financial support to terrorists resulting from property and transactions in the United States. Other anti-money laundering and antiterrorist financing laws include the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the Patriot Act). These laws use the existing legal framework for the prevention of money laundering and tax evasion as the basis to apply to a wide range of customer due-diligence and organizational requirements on financial institutions and other entities. In 2004, several large banks including AmSouth and Bank of New York, were penalized for their non-compliance with anti-money laundering laws and, as a result, paid tens of millions of dollars in fines. In light of the significant liabilities and potential penalties involved, real estate lenders must understand the obligations imposed by anti-money laundering and anti-terrorist financing laws such as the Order, the BSA and the Patriot Act. Real estate lenders should carefully examine their procedures to be sure that they will take the steps necessary to protect themselves from liability under the new laws and regulations and any future legal developments in this area.