Title: KLEPTO Act
Policy area: Finance and Financial Sector

Summary:
Kleptocrat Liability for Excessive Property Transactions and Ownership Act or the KLEPTO Act
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.

[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[S. 4075 Introduced in Senate (IS)]

<DOC>






117th CONGRESS
  2d Session
                                S. 4075

To prevent money laundering, the financing of terrorism, or other forms 
   of illicit finance through United States real estate and vehicle 
 transactions, including by Russian oligarchs, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             April 7, 2022

 Mr. Whitehouse (for himself, Mr. Cassidy, Ms. Warren, and Mr. Wicker) 
introduced the following bill; which was read twice and referred to the 
            Committee on Banking, Housing, and Urban Affairs

_______________________________________________________________________

                                 A BILL


 
To prevent money laundering, the financing of terrorism, or other forms 
   of illicit finance through United States real estate and vehicle 
 transactions, including by Russian oligarchs, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Kleptocrat Liability for Excessive 
Property Transactions and Ownership Act'' or the ``KLEPTO Act''.

SEC. 2. DEFINITIONS.

    In this Act:
            (1) Administrator.--The term ``Administrator'' means the 
        Administrator of the Federal Aviation Administration.
            (2) Bank secrecy act.--The term ``Bank Secrecy Act'' 
        means--
                    (A) section 21 of the Federal Deposit Insurance Act 
                (12 U.S.C. 1829b);
                    (B) chapter 2 of title I of Public Law 91-508 (12 
                U.S.C. 1951 et seq.); and
                    (C) subchapter II of chapter 53 of title 31, United 
                States Code.
            (3) Beneficial owner.--The term ``beneficial owner'' has 
        the meaning given the term in section 5336(a) of title 31, 
        United States Code.
            (4) Covered entity.--The term ``covered entity'' means a 
        non-natural person, association, or arrangement, including any 
        trust, partnership, foundation, corporation, limited liability 
        company, or other public or private entity.
            (5) Director.--The term ``Director'' means the Director of 
        FinCEN.
            (6) FinCEN.--The term ``FinCEN'' means the Financial Crimes 
        Enforcement Network of the Department of the Treasury.
            (7) Foreign person.--The term ``foreign person'' means an 
        individual who is not--
                    (A) a United States person; or
                    (B) an alien lawfully admitted for permanent 
                residence into the United States.
            (8) Real estate professional.--The term ``real estate 
        professional''--
                    (A) means a person described in section 
                5312(a)(2)(U) of title 31, United States Code; and
                    (B) may include a loan broker, lender, title 
                insurance company, title insurance agent, escrow agent, 
                developer, investment company, investment adviser, real 
                estate investment trust, real estate agent, attorney, 
                law firm, or other financial, real estate, or legal 
                professional.
            (9) Secretary.--The term ``Secretary'' means the Secretary 
        of the Treasury.
            (10) State.--The term ``State'' means any State of the 
        United States, the District of Columbia, the Commonwealth of 
        Puerto Rico, the Commonwealth of the Northern Mariana Islands, 
        American Samoa, Guam, the United States Virgin Islands, and any 
        other commonwealth, territory, or possession of the United 
        States.
            (11) United states person.--The term ``United States 
        person'' means a natural person who is a citizen of the United 
        States or who owes permanent allegiance to the United States.

SEC. 3. ANTI-MONEY LAUNDERING SAFEGUARDS FOR REAL ESTATE TRANSACTIONS.

    (a) Rulemaking.--Not later than 1 year after the date of enactment 
of this Act, in conjunction with the authority under section 5318(a)(2) 
of title 31, United States Code, the Director shall issue a final rule 
to guard against money laundering, the financing of terrorism, or other 
forms of illicit finance through commercial and residential real estate 
transactions under the Bank Secrecy Act, including by--
            (1) requiring real estate professionals to collect and 
        report to the Director beneficial ownership information for 
        each commercial and residential real estate transaction 
        involving real estate located in a State and involving a buyer 
        or seller that is a covered entity, regardless of the transfer 
        price;
            (2) in collecting and reporting the information under 
        paragraph (1), defining commercial or residential real estate 
        transactions to include direct and indirect transfers of real 
        estate, including through the direct or indirect transfer of 
        the ownership or control of a covered entity that directly or 
        indirectly owns or controls the real estate that is the subject 
        of the transaction;
            (3) establishing a system to determine which real estate 
        professionals must collect and report the information under 
        paragraph (1);
            (4) requiring the Director to validate the information 
        reported under paragraph (1);
            (5) requiring real estate professionals reporting 
        information under paragraph (1) to take reasonable measures to 
        verify the accuracy of the information reported under this 
        subsection; and
            (6) using the definition of ``beneficial owner'' in section 
        5336(a) of title 31, United States Code.
    (b) Report.--Not later than 360 days after the date of enactment of 
this Act, the Secretary shall submit to the appropriate congressional 
committees a report on how digital ledger technology can be implemented 
to create a tamper-proof permanent record of direct and indirect 
transfers of real estate, including through direct or indirect transfer 
of ownership or control of a covered entity that directly or indirectly 
owns or controls the real estate that is subject to the transaction.
    (c) Anti-Money Laundering Requirements for Real Estate 
Professionals.--In the rule required under subsection (a), the Director 
shall require the 1 or more real estate professionals determined under 
subsection (a)(3) to--
            (1) report suspicious transactions under section 5318(g)(1) 
        of title 31, United States Code;
            (2) establish anti-money laundering programs under section 
        5318(h) of title 31, United States Code;
            (3) establish customer due diligence policies, procedures, 
        and controls under section 5318(i) of title 31, United States 
        Code; and
            (4) establish written procedures reasonably designed to 
        identify and verify under section 5318(l) of title 31, United 
        States Code, the identity of customers, including the 
        beneficial owners of any covered entity, involved in commercial 
        and residential real estate transactions.

SEC. 4. REAL ESTATE PILOT PROGRAM.

    (a) In General.--Not later than 2 years after the date of enactment 
of this Act, the Secretary shall pilot a comprehensive e-governance 
framework for the transparency of commercial and residential real 
estate sales and purchases in the United States, which shall--
            (1) designate a pilot locale for the implementation of the 
        pilot program after obtaining the consent of the relevant 
        State; and
            (2) design a cloud-based distributed ledger for real estate 
        in the pilot locale, which shall--
                    (A) consist of a cloud-based network for digital 
                governance that--
                            (i) provides real-time integrated 
                        information to users, which may include 
                        individuals, entities, and governments; and
                            (ii) allows users to conduct economic and 
                        other activity through an internet website or 
                        mobile application;
                    (B) be designed to minimize corruption and maximize 
                transparency for persons engaged in real estate 
                transactions, investment, assistance, and any other 
                activities under section 3; and
                    (C) include the integration with other systems 
                required under subsection (b) and the capabilities 
                described in subsection (c).
    (b) Integration With Other Systems.--The Secretary shall design the 
framework established under subsection (a) to be capable of integration 
with--
            (1) the Bank Secretary Act databases maintained by FinCEN, 
        including--
                    (A) the beneficial ownership information collected 
                by FinCEN under Geographic Targeting Orders;
                    (B) the directory of beneficial ownership 
                information collected under section 5336 of title 31, 
                United States Code; and
                    (C) any other Bank Secrecy Act database as 
                determined by the Director;
            (2) the sanctions lists maintained by the Department of the 
        Treasury's Office of Foreign Assets Control;
            (3) the information exchanging systems of the Egmont Group 
        of Financial Intelligence Units;
            (4) the digital business registry databases of other 
        countries;
            (5) the real estate registries of States and political 
        subdivisions of States;
            (6) the beneficial ownership information collected under 
        section 3(a); and
            (7) any other system as determined by the Secretary.
    (c) Other Requirements.--
            (1) Open source.--The Secretary shall ensure that the code 
        used for the framework established under subsection (a) is open 
        source and capable of being audited.
            (2) Multi-lingual functionality.--The Secretary shall 
        ensure that the framework established under subsection (a) is 
        functional in--
                    (A) English, Spanish, French, and Portuguese; and
                    (B) any other language as determined by the 
                Secretary.
            (3) Standards.--The Secretary shall include in the 
        framework established under subsection (a) standards for 
        entities seeking to create their own e-governance systems.

SEC. 5. CERTIFICATION OF AIRCRAFT REGISTRATION.

    (a) In General.--Before approving a certificate of registration 
issued under section 44103 of title 49, United States Code, with a 
covered entity, the Administrator of the Federal Aviation 
Administration shall require the covered entity to--
            (1) identify each beneficial owner of the covered entity 
        by--
                    (A) name;
                    (B) current residential or business street address;
                    (C) a unique identifying number from a nonexpired 
                passport issued by the United States or a nonexpired 
                drivers license issued by a State or if neither is 
                available, a legible and credible copy of the pages of 
                a nonexpired passport issued by the government of a 
                foreign country bearing a photograph, date of birth, 
                and unique identifying information for the person;
                    (D) nationality; and
                    (E) the make, model, and serial number of the 
                aircraft to be registered;
            (2) in the case of a covered entity that is owned or 
        controlled by more than 1 entity--
                    (A) identify how each entity relates to every other 
                entity, including--
                            (i) the extent to which each entity holds 
                        an ownership interest in or exercises control 
                        over another entity; and
                            (ii) the relationship of each such entity 
                        with the beneficial owners who are natural 
                        persons; and
                    (B) identify each trust grantor, trustee, trust 
                protector, and beneficiary of the covered entity that 
                is a foreign person;
            (3) in the case of a trust or association, identify the 
        chain of control within the trust or association, including 
        with respect to the beneficial owners, any trust grantor, 
        trustee, trust protector, and beneficiary, and any association 
        director, officer, or manager; and
            (4) disclose to the Administrator any beneficial owner of 
        the covered entity that is a foreign person.
    (b) Timing.--
            (1) In general.--The Administrator shall require a covered 
        entity to provide the information described in subsection (a) 
        when submitting an application for aircraft certification.
            (2) Existing registrants.--For a covered entity that 
        submitted an application for aircraft certification prior to 
        enactment of this Act, the Administrator shall require the 
        covered entity to provide the information described in 
        subsection (a) in a new submission to the Administrator not 
        later than 180 days after the date of enactment of this Act.
            (3) Updates.--The Administrator shall require a covered 
        entity to update a submission of the information described in 
        subsection (a) not later than 60 days after the date of any 
        change in--
                    (A) the list of beneficial owners of the covered 
                entity; or
                    (B) the information required to be provided 
                relating to each such beneficial owner.

SEC. 6. ANTI-MONEY LAUNDERING REQUIREMENTS FOR BUSINESSES ENGAGED IN 
              VEHICLE SALES.

    Not later than 1 year after the date of enactment of this Act, in 
conjunction with the authority under section 5318(a)(2) of title 31, 
United States Code, the Secretary shall issue a final rule that 
requires all businesses described in section 5312(a)(2)(T) of title 31, 
United States Code, to comply with the due diligence and reporting 
requirements applicable to financial institutions under subchapter II 
of chapter 53 of title 31, United States Code, including--
            (1) reporting suspicious transactions under section 
        5318(g)(1) of title 31, United States Code;
            (2) establishing anti-money laundering programs under 
        section 5318(h) of title 31, United States Code;
            (3) establishing customer due diligence policies, 
        procedures, and controls under section 5318(i) of title 31, 
        United States Code; and
            (4) establishing written procedures reasonably designed to 
        identify and verify under section 5318(l) of title 31, United 
        States Code, the identity of customers, including the 
        beneficial owners of any covered entity, involved in a vehicle 
        sale.

SEC. 7. BENEFICIAL OWNERSHIP DIRECTORY.

    If an entity formed under the law of a foreign country takes 
ownership or control of real estate located within the United States 
through a real estate transaction carried out by a real estate 
professional subject to this Act, and if that entity would have 
qualified as a reporting company under section 5336(a)(11)(A)(ii) of 
title 31, United States Code, except that a State exempted the entity 
from a State registration requirement because the only business of the 
entity within the State is to purchase or hold real estate within a 
State, that entity shall nevertheless be deemed a reporting company 
under section 5336(a)(11)(A)(ii) of such title and shall file the 
reports required under section 5336(b) of such title.

SEC. 8. APPLICABILITY.

    This Act and the rules issued under this Act shall apply to 
beneficial owners of covered entities regardless of whether the covered 
entity is a reporting company, as defined in section 5336(a) of title 
31, United States Code.

SEC. 9. PROGRAM COST ESTIMATION.

    Not later than 120 days after the date of enactment of this Act, 
the Secretary and the Administrator shall each submit to Congress a 
cost estimate for implementing this Act.

SEC. 10. EFFECTIVE DATE.

    The effective date of each rule issued under this Act shall be 1 
year after the date on which the final rule is issued.
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