USA Patriot Act Impacts Real Estate Transactions
By: MARY S. RANUM & KAREN L. GRANDSTRAND
May 2003
In response to the terrorist attacks of September 11th, Congress enacted the USA Patriot Act on October 26, 2001. The Act, also known as the “Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001,” was intended to give law enforcement greater powers, create new and enhance existing criminal penalties, and place additional burdens on financial institutions and other parties.
One section of the Act impacts real estate transactions by providing that “any person who, in the course of a trade or business, in which such person is engaged, receives currency in excess of $10,000 in one transaction (or two or more related transactions) shall, except as otherwise provided, make a report of information with respect to receipt of the currency.” This section went into effect on January 1, 2002, and requires that any party who receives more than $10,000 in any transaction file a report with the U.S. Treasury Department.
The Treasury Department defines “transaction” to include the sale of real property or a rental of real or personal property. The regulations state that Section 365 applies both to the parties to a transaction as well as to persons acting as agents for parties in a transaction. The example given in the regulations is that of an attorney acting on behalf of a client. Presumably, a title company or other agent for a party would also be included in the scope of the law.
The definition of “currency” in the regulations is broader than just the coin and currency. Included are cashier’s checks, bank drafts, traveler’s checks or money orders having a face amount of less than $10,000. Personal checks are not included in the definition of currency. Financial institutions must report the issuance of cashier’s checks and other bank checks in excess of $10,000. The regulations are intended to cover transactions that are not within the scope of financial institution reporting; that is, transactions that involve a combination of cashier’s checks or other bank checks of less than $10,000 and coin or currency, that together exceed $10,000. For example, someone who receives an earnest money payment consisting of a combination of coin and currency of the United States, cashier’s or other bank checks with face amounts of less than $10,000, that total more than $10,000, will be covered by the Act and must report the transaction to the U.S. Department of Treasury.
This article is not intended to be a full recitation of all of the details of the new law but rather to bring to your attention its impact on real property transactions.