Risk Real Estate Russian: FinCEN Alert on Potential U.S. Commercial Real Estate Investments by Sanctioned Russian Elites, Oligarchs, and Their Proxies
The Financial Crimes Enforcement Network (FinCEN) has issued an aler to provide guidance to financial institutions regarding possible sanction evasion attempts by Russian oligarchs through investments in commercial and / or private real estate.
The alert provides examples of such attempts thereby specifically addressing – among others –
– real estate investments via pooled investment vehicles (investment funds) which may not trigger additional customer due diligence requirements or disclosures requirements on beneficial owners, if the (Russian) investors stay below the typical 10% ownership limit;
– the use of shell companies with many subsidiaries & ownership structures scattered around the world often in form of real estate development companies which invest in commercial real estate in the U.S.; and
– the use of third parties to conduct real estate investments on behalf of sanctioned Russian persons or firms.
Additionally, the alert outlines some red flags in connection with attempted sanction evasion via real estate investments including, but not limited to the following:
– sudden reduction in ownership interests in private investment funds;
– investments in US real estate by overseas real estate funds whose investors are family members, associates, or friends of Russian oligarchs;
– shared ownership in real estate by multiple (foreign) entities or trusts;
– the refusal to provide information on beneficial ownership; or
– investments in real property appear to be „out of line“, that is unusual for the company’s normal business operations.
Finally, the alert provides guidance to institutions as to their reporting obligations in this context and the applicable laws and regulations that mandate enhanced due diligence with respect to certain customer accounts.
For details on the alert, please consult the attached document or follow above noted link.
