Bill Overview
Title: KLEPTO Act
Description: This bill expands anti-money laundering reporting requirements for certain transactions involving real estate, aircraft, and other vehicles. Specifically, real estate professionals must report to the Department of the Treasury beneficial owner information (e.g., the identity of an individual behind a corporate entity) for each commercial and residential real estate transaction involving a covered entity (i.e., a nonnatural person, association, or arrangement, including any trust, partnership, foundation, corporation, limited liability company, or other public or private entity). Real estate professionals must also report suspicious transactions, establish anti-money laundering programs and due diligence policies, and develop procedures to identify beneficial owners. Additionally, Treasury must implement a state-level pilot program to design and test a digital ledger of real estate transactions. This ledger must provide real-time information and integrate with other databases that track beneficial ownership, sanctions, and other business and real estate registries. An entity must identify each beneficial owner prior to registering an aircraft. Existing registrants must submit this information not later than 180 days after the date of this bill's enactment. A business engaged in vehicle sales (including automobile, airplane, and boat sales) must report suspicious transactions, establish anti-money laundering programs and due diligence policies, and develop procedures to identify beneficial owners.
Sponsors: Sen. Whitehouse, Sheldon [D-RI]
Target Audience
Population: Individuals involved in real estate, aircraft, and vehicle transactions through corporate entities
Estimated Size: 10000000
- The bill impacts individuals involved in real estate, aircraft, and vehicle transactions by imposing new reporting requirements, thus affecting individuals behind corporate entities in these transactions.
- It affects beneficial owners who might be hidden behind corporate entities involved in real estate, aircraft, and vehicle transactions.
- Real estate professionals, as well as businesses involved in the sale of vehicles and aircraft, will need to comply with new regulations, which will directly impact how they conduct business.
- The integration of a digital ledger system and other databases will affect those maintaining or conducting transactions in real estate.
- The bill is likely targeted at reducing money laundering by making it harder to obscure ownership through corporate layers, primarily affecting individuals using these methods.
Reasoning
- The KLEPTO Act primarily targets individuals involved with corporate entities obscuring ownership in real estate, aircraft, and vehicle markets. This includes real estate professionals and businesses dealing in high-value assets who need to comply with the new requirements.
- Potentially affected individuals could range from property buyers using corporate vehicles, to employees in real estate brokerages, to car dealership owners who must revamp their compliance procedures.
- The population affected is large given the substantial number of such transactions in the U.S. each year, although the impact on individual wellbeing will vary.
- Some individuals might see a negative impact on workload or costs due to increased reporting and compliance burdens, while others may see long-term benefits from increased market transparency.
Simulated Interviews
Real Estate Broker (New York, NY)
Age: 45 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 5.0 years
Commonness: 7/20
Statement of Opinion:
- This policy could increase our operational costs and reduce transaction speed due to the new reporting requirements.
- In the long run, it might help establish trust and professionalism in the market.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 7 |
| Year 2 | 6 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 7 | 7 |
| Year 10 | 8 | 7 |
| Year 20 | 8 | 7 |
Automobile Dealership Owner (Los Angeles, CA)
Age: 50 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 3.0 years
Commonness: 5/20
Statement of Opinion:
- I foresee extensive paperwork and compliance checks which may slow down our operations.
- However, it may weed out the illegal transactions we face occasionally.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 7 | 6 |
| Year 10 | 7 | 7 |
| Year 20 | 8 | 7 |
Pilot and Aircraft Leasing Business Owner (Miami, FL)
Age: 35 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 10.0 years
Commonness: 3/20
Statement of Opinion:
- The new rules around aircraft registration are going to complicate current leasing contracts.
- If they streamline the ownership process, it could be beneficial in some areas.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 4 | 5 |
| Year 2 | 5 | 5 |
| Year 3 | 6 | 5 |
| Year 5 | 6 | 5 |
| Year 10 | 7 | 6 |
| Year 20 | 8 | 6 |
Corporate Lawyer (Boston, MA)
Age: 29 | Gender: female
Wellbeing Before Policy: 8
Duration of Impact: 2.0 years
Commonness: 6/20
Statement of Opinion:
- This law provides more work for me, giving rise to new consultancy opportunities.
- It's challenging, but ultimately I see it improving market transparency.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 9 | 8 |
| Year 3 | 8 | 8 |
| Year 5 | 9 | 8 |
| Year 10 | 9 | 8 |
| Year 20 | 9 | 8 |
Retired Software Engineer (Austin, TX)
Age: 62 | Gender: other
Wellbeing Before Policy: 9
Duration of Impact: 1.0 years
Commonness: 12/20
Statement of Opinion:
- I would appreciate the increased transparency in the real estate market this bill might foster.
- Personally, it won't affect my day today, but I will benefit if real estate fraud is reduced.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 9 | 9 |
| Year 2 | 9 | 9 |
| Year 3 | 9 | 9 |
| Year 5 | 9 | 9 |
| Year 10 | 10 | 9 |
| Year 20 | 10 | 9 |
CEO of a Real Estate Corporation (Seattle, WA)
Age: 40 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 4.0 years
Commonness: 4/20
Statement of Opinion:
- The administrative burden is going to increase, impacting our deal velocity.
- If it helps eliminate unfair competitors using illicit funds, it might be worth it.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 6 |
| Year 2 | 5 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 7 | 6 |
| Year 10 | 8 | 7 |
| Year 20 | 8 | 7 |
Start-up Founder (San Francisco, CA)
Age: 27 | Gender: female
Wellbeing Before Policy: 8
Duration of Impact: 2.0 years
Commonness: 6/20
Statement of Opinion:
- This law could create more data for us to analyze and build tools around.
- It's going to be challenging, but serves the public interest in my view.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 9 | 8 |
| Year 2 | 9 | 8 |
| Year 3 | 9 | 8 |
| Year 5 | 9 | 8 |
| Year 10 | 9 | 9 |
| Year 20 | 10 | 9 |
Real Estate Investor (Chicago, IL)
Age: 48 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 5.0 years
Commonness: 5/20
Statement of Opinion:
- This is going to make my business dealings more transparent than some clients would like.
- It might limit some of my investment flexibility, but it's not about me.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 7 |
| Year 2 | 6 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 7 | 7 |
| Year 10 | 8 | 7 |
| Year 20 | 8 | 7 |
Credit Union Manager (Phoenix, AZ)
Age: 38 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 3.0 years
Commonness: 7/20
Statement of Opinion:
- We have to change our procedures immensely with this policy in place, which is taxing.
- Still, it's a necessary measure against financial misdeeds.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 7 |
| Year 2 | 6 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 7 | 7 |
| Year 10 | 7 | 7 |
| Year 20 | 7 | 7 |
Commercial Realtor (Dallas, TX)
Age: 51 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 4.0 years
Commonness: 6/20
Statement of Opinion:
- Our clients might face slower transactions and added bureaucracy.
- If implemented well, it could lead to a more credible market environment.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 5 |
| Year 2 | 5 | 5 |
| Year 3 | 6 | 5 |
| Year 5 | 6 | 5 |
| Year 10 | 7 | 5 |
| Year 20 | 8 | 6 |
Cost Estimates
Year 1: $50000000 (Low: $30000000, High: $70000000)
Year 2: $35000000 (Low: $25000000, High: $45000000)
Year 3: $35000000 (Low: $25000000, High: $45000000)
Year 5: $40000000 (Low: $30000000, High: $50000000)
Year 10: $45000000 (Low: $35000000, High: $55000000)
Year 100: $75000000 (Low: $50000000, High: $100000000)
Key Considerations
- The effectiveness of the digital ledger pilot program and its scalability could significantly influence both costs and savings.
- The real estate and vehicle sectors must adapt to new compliance burdens, which could affect market dynamics.
- Accurate identification of beneficial owners is crucial for the law to achieve its purpose but could be challenging to implement effectively.