FinCEN Extends Money Laundering Prevention Effort in Six Metros
February 23, 2017
The Financial Crimes Enforcement Network (FinCEN) renewed existing Geographic Targeting Orders (GTO) that require U.S. title insurance companies—along with their subsidiaries and agents—to identify the individuals behind companies used to conduct high-end, all-cash real estate transactions in six major jurisdictions.
In January 2016, FinCEN originally ordered two GTOs requiring certain underwriters to identify and report the true “beneficial owner” behind a legal entity involved in certain high-end deals in Manhattan and Miami-Dade County. FinCEN broadened the GTO in July to include more areas and now has renewed the order for another 180 days because results have corroborated concerns. FinCEN reported that it found about 30 percent of the transactions covered by the GTOs involve a beneficial owner or purchaser representative that is also the subject of a previous suspicious activity report.
“These GTOs are producing valuable data that is assisting law enforcement and is serving to inform our future efforts to address money laundering in the real estate sector,” said FinCEN Acting Director Jamal El-Hindi. “The subject of money laundering and illicit financial flows involving the real estate sector is something that we have been taking on in steps to ensure that we continue to build an efficient and effective regulatory approach.”
A beneficial owner is an individual or entity who directly or indirectly owns 25 percent or more of the equity interest in the legal entity. FinCEN provides the information to law enforcement investigators as part of FinCEN’s database.
Due to information collected by the title industry, one beneficial owner was found to be connected to over $140 million in money laundering activity. Another transaction involved a beneficial owner connected to a public corruption investigation involving a foreign government. FinCEN acknowledged that title insurance companies play a central role in providing valuable information about real estate transactions of concern.
“FinCEN appreciates the continued assistance and cooperation of the title insurance companies and the American Land Title Association in protecting the real estate markets from abuse by illicit actors,” FinCEN said in a release.
ALTA will continue to work closely with its members and FinCEN to collect the needed information as efficiently as possible.
“Our members have collected this information for more than a year and the good news is those efforts appear to be beneficial to the government's work identifying money laundering schemes and the illegal purchase of real estate,” said Michelle Korsmo, ALTA’s chief executive officer. “
The extended GTO includes these areas and price thresholds:
- Borough of Manhattan, N.Y.; $3 million
- Borough of Brooklyn, Queens and Bronx, N.Y.; $1.5 million
- Miami-Dade, Broward and Palm Beach counties, Florida; $1 million
- Los Angeles, San Francisco, San Mateo, Santa Clara and San Diego counties, California; $2 million
- Bexar County, Texas (San Antonio); $500,000
A currency transaction report must be filed with FinCEN if these things occur:
- Location (deal occurs in one of the areas included in the GTOs)
- All-cash deal (no financing)
- Purchase price exceeds threshold determined for each jurisdiction (see below)
- There’s a corporate buyer
- Purchase price paid via monetary instrument
The report must include:
- Information about the identity of the individual primarily responsible for representing the buyer. The title company must obtain a record of the individual’s driver’s license, passport of other similar identification
- Date of closing of the covered transaction
- Total amount transferred in the form of a monetary instrument
- Total purchase price of the covered transaction
- Address of real property involved
If the purchase involved in the covered transaction is a limited liability company, the underwriter must provide the name, address and taxpayer identification number of all its members. Additionally, covered title companies must retain all records relating to compliance with the order for five years, store the records so they are accessible with a reasonable period of time and make the data available to FinCEN or other law enforcement or regulatory agency, upon request.
ALTA has developed several tools to help members comply with the order, including:
- Geographic Targeting Orders Fact Sheet
- IRS Form 8300 (Report of Cash Payments Over $10,000 Received in a Trade or Business)
- ALTA Covered Transaction Determination Form
- Information Collection Form
Contact ALTA at 202-296-3671 or firstname.lastname@example.org.