FinCEN, the primary U.S. government authority involved in anti-money laundering compliance and enforcement, has issued a new Geographic Targeting Order (GTO), effective May 21st, in an attempt to crack down on money laundering in real estate. A GTO requires financial institutions and businesses in a certain geographic areas to report on transactions any greater than a specified value.
Unlike previous GTOs, the details of this order cannot be publicly shared. Title companies and their agents have received details in the mail.
The reason is obvious: when the threshold for reporting is known by those who wish to launder their money through a real estate transaction, they simply launder their money with transactions under the threshold.
So while we cannot share the price thresholds that trigger reporting or the covered jurisdictions, we can tell you that this GTO requires title companies to disclose the identity of all-cash buyers who purchase luxury property under an LLC.
How a Geographic Targeting Order Works
According to a FinCEN statement, “The GTOs issued to date have provided FinCEN and law enforcement important information about money laundering vulnerabilities in the real estate sector. GTOs are a valuable tool and FinCEN will continue its efforts to study this vulnerability.”
New GTOs do not render previous orders defunct. Rather, new GTOs are announced in order to close up loopholes in enforcement. For example, LLCs were added to the disclosure rule in March of 2016. Wire transfers were added in August of 2017.
We encourage you to review the details of the prior FinCEN GTOs in our blog, as many of the requirements are the same. You may also find these GTO Frequently Asked Questions helpful, courtesy of FinCEN.