FinCEN Updates FAQs for Geographic Targeting Orders

March 8, 2016

In an effort to identify money-laundering schemes, the Financial Crimes Enforcement Network (FinCEN) has issued Geographic Targeting Orders requiring several title insurance underwriters to identify the names of individuals involved in shell companies and other legal entities that make all-cash purchases for residential transactions that exceed $3 million in Manhattan, N.Y., and exceed $1 million in Miami-Dade County, Fla. All covered transactions that settle between March 1 and Aug. 27, 2016, must be reported.

FinCEN issued updated GTO FAQs that address when there are a series of transactions that close separately, if a photo ID must be obtained of every member of an LLC and the impact ancillary settlement charges have on whether the transaction is reportable.

Series of Transactions That Close Separately

If a Purchaser brings multiple transactions to us during the period of the GTOs, for example multiple condo units which are separate transactions each closing at a separate time or separate date, but each individually falls under the reporting threshold, are we required to report each unit sale if we know about the proposed series purchases? 

Each transaction should be evaluated separately as to whether it is a Covered Transaction.  The GTOs do not require reporting of a series of transactions.  However, if a Covered Business believes that transactions are being structured in such a way to avoid a reporting requirement, FinCEN reminds Covered Businesses that the Form 8300 may be filed voluntarily to report suspicious transactions.

LLC as Purchaser

An LLC may have many members. Do the GTOs require photo IDs on every member of the LLC? 

Sections II.B.2.i. and II.B.2.iii of the GTOs provide that the Covered Business must obtain a copy of a driver’s license, passport, or other similar identifying documentation only from (i) the individual primarily responsible for representing the Purchaser, and (ii) each Beneficial Owner of the Purchaser (i.e., each individual who, directly or indirectly, owns 25% or more of the equity interests of the Purchaser). Section provides that a Covered Business must include in the Comments section to the Form 8300 the name, address, and taxpayer identification number of all the members of a limited liability that is a Purchaser in a Covered Transaction.  Section does not, however, require the collection or retention of identifying documentation.

Ancillary Settlement Charges 

If the total purchase price for the real estate is paid using a non-reportable method, i.e. wire, personal check or firm check, but incidental charges and fees such as attorneys’ fees, inspection fees, survey fees, settlement service fees are paid using currency, is the transaction reportable? 

Section II.A.2.v. of the GTOs provides that payment of at least part of the purchase price using one of the listed methods, such as a cashier’s check (sometimes referred to as a “bank check,” “official check,” or “treasurer’s check”) or a certified check, triggers a Covered Transaction, assuming the other four criteria listed in Section II.A.2. are met. Payments for ancillary settlement services (e.g., attorneys’ fees, inspection fees, survey fees, etc.) are not considered part of the purchase price.

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