Senators Want GAO Report on Effectiveness of FinCEN’s Money Laundering GTOs

October 4, 2018

Two U.S. Senators have asked the Government Accountability Office (GAO) to study the issue of money laundering in real estate transactions and the effectiveness of the Treasury’s Financial Crimes Enforcement Network (FinCEN) Geographic Targeting Orders.

In a letter, Sens. Chris Van Hollen (D-Md.) and Sheldon Whitehouse (D-R.I.) asks the GEO to address the following questions:

  1. Has the information gathered by the GTOs provided useful insight about any regulatory gaps or exemptions that exist regarding the Bank Secrecy Act and the real estate industry?
  2. Has the information gathered by the GTOs produced other tangible benefits, and in what ways will closing regulatory gaps or exemptions enhance financial market integrity in the United States?
    • How has FinCEN used the information collected from the real estate GTOs to inform its ongoing efforts to address money laundering vulnerabilities?
    • Has the information gathered by the GTOs improved the ability of FinCen, DOJ, the FBI and other law enforcement agencies to prevent money laundering in the real estate industry?
    • Based on the information it has collected from these GTOs, is FinCEN considering any regulatory changes?
  3. Are there ways to improve upon the information gathered by the GTOs to make FinCEN more effective in the fight against money laundering?
    • Are there any gaps or loopholes that exist in the design of the GTO program that could be exploited by illicit actors, such as the beneficial ownership thresholds or limiting the GTO to title insurance companies?
    • Are there any unintended consequences from targeting specific geographic regions while leaving other areas uncovered? The adaptive nature of illicit actors raises concerns they may shift their real estate activities from GTO areas to other regions of the United States.
  4. Lastly, we ask that GAO identify any additional vulnerabilities and gaps in the current BSA framework, specifically as they pertain to the real estate sector, and how they might be addressed through regulatory or legislative action.

The Bank Secrecy Act established anti-money laundering obligations for financial institutions, including institutions involved in real estate transactions. Although real estate title and escrow companies are not specifically listed among the businesses defined as financial institutions in the BSA, “persons involved in real estate closings and settlements” are listed as financial institutions. FinCEN has not issued regulations defining who is included in this category. In their letter to the GAO, the senators say that because there is no mandatory reporting requirements placed on “real estate funds, title insurance and escrow agents,” criminals can take advantage of gaps in the regulatory and law enforcement process. 

Since issuing the first GTO in January 2016, FinCEN has required 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 certain major jurisdictions.

FinCEN reported last year that the data collected indicated about 30 percent of reported transactions involve a beneficial owner or purchaser representative that was also the subject of a previous suspicious activity report.

Earlier this year, Whitehouse and Sens. Marco Rubio (R-Fla.) and Ron Wyden (D-Ore.) proposed an amendment to an unrelated spending bill that would require shell companies across the country to disclose their owners for real estate purchases of $300,000 or more in cash. The bill would give the U.S. Treasury 180 days to submit a study to Congress that would provide more details about the data that has been collected FinCEN. It would also ask FinCEN if a registry of company owners would help authorities combat money laundering, tax evasion, election fraud and other illegal activities.

Last year, Sen. Whitehouse introduced the True Incorporation Transparency for Law Enforcement Act (TITLE Act or S. 1454), which would require states to obtain information on the true owners of corporations and LLCs formed under state law and to make the information available to law enforcement upon receipt of a subpoena or summons. It would also extend money laundering due diligence requirements that currently apply to banks to professionals that help form business entities.

For questions about ALTA’s advocacy on anti-money laundering, contact Justin Ailes at [email protected].


Contact ALTA at 202-296-3671 or [email protected].