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The Patriot Act, passed in October of 2001, allows federal officials greater authority in tracking and intercepting communications, both for purposes of law enforcement and foreign intelligence gathering.
It has fundamentally altered how we travel, identify ourselves, and do business. Yet the ways in the which the Act affects due diligence during commercial and residential real estate transactions is a topic that’s frequently overlooked.
This blog will provide a brief explanation of the Patriot Act search requirements in real estate transactions.
Patriot Act Search Requirements in Real Estate Transactions
Section 352(a) of the Patriotic Act requires “persons involved in real estate closings and settlements” to establish anti-money laundering programs to ensure they are not transacting with entities or individuals being sanctioned by the Treasury Department’s Office of Foreign Assets Control (OFAC).
This blog will explain:
– How the Patriot Act impacts residential and commercial transactions
– What those involved in real estate transactions can do to protect themselves
Who is sanctioned by the Patriot Act?
The Patriot Act “blocks property and prohibits transactions with persons who commit, threaten to commit, or support terrorism.” OFAC regularly adds names of persons covered by the Patriot Act to their Specially Designated Nationals and Blocked Persons (SDN) list. Searching this list to ensure no party to the transaction is a sanctioned individual is referred to as running an OFAC search.
How does the Patriot Act impact commercial transactions?
Nearly 13 years later, the Act’s application remains a concern for buyers and sellers of real estate, both traditional and non-traditional real estate lenders, equity funds and promoters, landlords in lease transactions, brokers, attorneys, and any other professionals dealing in these commercial activities.
The Patriot Act and the Executive Order which followed soon on its heels both require anyone involved in a real estate transaction — buyers and sellers, traditional and alternative lenders, equity funds, landlords involved in lease transactions, etc. — to be aware of activities that could, directly or indirectly, finance or promote terrorism.
Keys to Remaining Compliant with the Patriot Act in Real Estate Transactions
1. Know who you are doing business with
You must aware of who you are transacting business with. You are responsible for knowing who the buyer and seller are, who the owners, controlling persons, investors, and affiliated entities are. You must know who is financing the transaction.
2. Perform Due Diligence
Perform an OFAC search to investigate all concerned parties. Title insurance companies may perform this kind of search, but if the purchasing funds come from outside sources then a typical title insurance search will not suffice.
Clarify Legal and Financial Risk with Punctual Abstract
To ensure you are complying with all Patriot Act search requirements in real estate transactions, choose Punctual Abstract!
We makes it easy to view all relevant risk information about any individual or company, either on an ongoing basis or on demand. We have been trusted by large companies for streamlined OFAC searches and abstracting across the United States.
Learn more about what makes us different from other OFAC due diligence providers by contacting Punctual now!