In its effort to combat money laundering in luxury residential real estate purchases, the Financial Crimes Enforcement Network (FinCEN) has announced a new Geographic Targeting Order (GTO) requiring title insurers and their subsidiaries to collect and report additional information about covered transactions (including wire purchases) in which a legal entity purchases residential real estate for a total of more than:
$3,000,000 or more in the Borough of Manhattan in the State of New York;
$1,500,000 or more in the Boroughs of Brooklyn, Queens, Bronx or Staten Island in the State of New York;
$1,000,000 or more in the Counties of Miami-Dade, Broward, and Palm Beach in the State of Florida
$500,000 in the County of Bexar in the State of Texas
$3,000,000 or more in the City and County of Honolulu in the State of Hawaii
$2,000,000 or more in the Counties of San Diego, Los Angeles, San Francisco, San Mateo, and Santa Clara in the State of California.
Unlike previous GTOs, this order does not exempt wire purchases from additional reporting requirements. Purchases funded by wire must be reported to FinCEN. This GTO is effective September 22nd, 2017 through March 20th, 2018.
FinCEN is the primary U.S. government authority involved in anti-money laundering compliance and enforcement in the United States. GTOs, which require financial institutions and businesses in a certain geographic area to report on transactions any greater than a specified value, are authorized by the Bank Secrecy Act (BSA). Previously limited to 60 days of duration, GTOs are now permitted to last up to 180 days – thanks to the passing of the USA Patriot Act.
This latest GTO is part of an ongoing effort by FinCEN to prevent individuals from laundering their money through all-cash real estate purchases and purchases through opaque limited liability companies.
FinCEN announced the first GTO targeting high-end covered transactions in New York City and Miami. It required all title insurers to report the identity of the “beneficial owner” in all-cash real estate transactions with purchase prices exceeding $3 million in Manhattan and $1 million in Miami-Dade County.
Encouraged by the information they obtained from their initial GTO in Manhattan and Miami, FinCEN expanded the GTO to include high-end all-cash buyers in all boroughs of New York City, three counties in Florida, five counties in California, and one county in Texas.
The latest GTO targets the same geographic areas as the July 2016 order, but also includes covered transactions of $3,000,000 or more in the City and County of Honolulu in the State of Hawaii. It is also different in its scope, as it includes wire purchases.
Given the susceptibility of certain real estate transactions to money-laundering activity and the new reporting requirements, now is the time for title insurance companies, real estate firms and professionals, and financial institutions to review their compliance procedures and internal controls to ensure compliance.At World Wide Land Transfer, our laser focus on compliance means that we are always there to help you navigate relevant regulations. We make it our business to be up to speed on the newest rules so that your interests are best protected.
Below are some resources you can use to learn more about Geographic Targeting Orders or the most recent Geographic Targeting Order, which is effective September 22nd 2017 (2).
GTO Frequently Asked Questions, courtesy of FinCEN
Advisory to Financial Institutions and Real Estate Firms and Professionals, courtesy of FinCEN
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