On November 15, 2018, FinCEN reissued a temporary geographic targeting order that requires covered U.S. title insurance companies to identify the natural persons behind shell companies used in all-cash purchases of residential real estate.
The new targeting order expands the coverage from seven to twelve major metropolitan areas including Boston; Chicago; Dallas-Fort Worth; Honolulu; Las Vegas; Los Angeles; Miami; New York City; San Antonio; San Diego; San Francisco; and Seattle. In addition to this, the purchase amount threshold, which previously varied by city, is now set at $300,000 for each covered metropolitan area. FinCEN is also requiring that covered purchases using virtual currencies be reported.
This targeting order is an expansion on four prior orders, two from 2016 and two from 2017. In January of 2016, FinCEN first issued GTOs to require U.S. title insurance companies to report beneficial ownership information on legal entities, including shell companies, used to purchase certain luxury residential real estate in Manhattan and Miami—specifically, luxury residential property purchased by a shell company without a bank loan and made at least in part using a cashier’s check or similar instrument. In July 2016 and February 2017, FinCEN reissued the original GTOs and extended coverage to all boroughs of New York City, two additional counties in the Miami metropolitan area, five counties in California (including Los Angeles, San Francisco, and San Diego), and the Texas county that includes San Antonio. In August of 2017, FinCEN reissued the orders to capture a broader range of transactions (including transactions involving wire transfers) and also expanded the GTOs to include transactions conducted in the Cit and County of Honolulu, Hawaii.
On August 22, 2018, FinCEN published and Advisory, known as FIN-2017-A003, to provide financial institutions and the real estate industry with information on the money laundering risks associated with real estate transactions, including those involving luxury property purchased through shell companies, particular when conducted without traditional financing.
FinCEN has explained that previous GTOs provided valuable data on the purchase of residential real estate by persons implicated, or allegedly involved, in various illicit enterprises including foreign corruption, organized crime, fraud, narcotics trafficking, and other violations. Therefore, reissuing the GTOs will further assist FinCEN in tracking illicit funds and other criminal or illicit activity, as well as inform FinCEN’s future regulatory efforts in this sector.
The November 15, 2018 targeting orders can be found here.
FAQs from the November 15, 2018 targeting orders can be found here.
The August 22, 2017 FinCEN release can be found here.
The August 22, 2017 advisory (FIN-2017-A003) can be found here.
The February 23, 2017 release can be found here.
The July 27, 2016 FinCEN release can be found here.
The January 13, 2016 FinCEN release can be found here.