On November 15, 2018, FinCEN announced the expansion of the existing real estate geographic target orders (GTO) to include 12 more metropolitan areas. As covered in previous TCA Special Delivery articles, a series of GTOs measures became effective March 1, 2016 which temporarily required certain U.S. title insurance companies in the Borough of Manhattan, New York City, New York, and the Miami-Dade County, Florida areas to identify the natural persons behind companies used to pay “all cash” for high-end residential real estate. Affected title insurance companies were required to identify and report the beneficial owners behind a legal entity involved in specific high-end residential real estate transactions.
Previous GTOs have provided valuable data regarding the purchase of residential real estate related to foreign corruption, organized crime, fraud, narcotics trafficking and other violations. The November 15 order is being reissued to expand coverage areas, increase purchase amount thresholds and add virtual currency purchase reporting requirements. The revised order covers residential real estate purchased by a legal entity with a purchase price of $300,000 or greater in the Texas counties of Bexar, Tarrant or Dallas; Florida counties of Miami-Dade, Broward or Palm Beach; New York Boroughs of Brooklyn, Queens, Bronx, Staten Island or Manhattan in New York City; California counties of San Diego, Los Angeles, San Francisco, San Mateo or Santa Clara; Hawaii city and county of Honolulu; Nevada county of Clark; Washington county of King; Massachusetts counties of Suffolk or Middlesex; and Illinois county of Cook. These purchases are covered if they are made without a bank loan or other external financing or if such purchases are made, at least in part, using cash or cashier’s checks, certified checks, traveler’s checks, personal or business checks, money orders, funds transfers or virtual currency.
Affected title insurance companies must implement procedures in accordance with the reporting requirements of the GTO and ensure collection of beneficial owner information to identify any legal entity parties to the transaction.
Concerns regarding real estate purchases continue to arise from the ability of those without bank financing to attempt or succeed, at hiding assets by using limited-liability companies and other corporate structures to disguise individual identities. There are risks associated with using premium U.S. real estate to launder millions of dollars of illicit funds into the financial system. These revisions will allow FinCEN to further track illicit funds and other criminal activity.
If you have not updated your BSA Program to include the handling of a GTO, now is the time. These types of orders are becoming more common in the fight against illicit financial activities. Also, have you developed policies, processes or procedures to ensure that your bank will be ready if such an order should be issued in your area? Anticipating BSA risk is critical in a BSA Program, so advance preparation of a more common occurrence is the right answer! Please reach out to TCA’s BSA Team for any questions regarding this or any GTO.