Yesterday, the Financial Crimes Enforcement Network (FinCEN) announced the renewal of certain Geographic Targeting Orders (GTOs) that temporarily place specific anti-money laundering-related reporting requirements on U.S. title insurance companies. These GTOs, which were originally issued in July 2016, require U.S. title insurance companies to collect and report information about persons involved in certain high-end residential real estate transactions in the following six key metropolitan markets:
- All boroughs of New York City
- Miami-Dade County and the two counties immediately north (Broward and Palm Beach)
- Los Angeles County
- Three counties comprising part of the San Francisco area (San Francisco, San Mateo, and Santa Clara counties)
- San Diego County
- Bexar County, which includes San Antonio, Texas
These renewed GTOs are effective beginning February 24, 2017, and end on August 22, 2017 (180 days after the effective date).
FinCEN is interested in gathering as much information as possible about the beneficial owners of shell companies that are used to pay “all cash” for high-end residential real estate in these specific markets. In fact, as noted by FinCEN in its press release, the renewal of the GTOs is largely attributable to the finding that roughly 30 percent of the transactions covered by the GTOs to date involve a beneficial owner or purchaser representative that is also the subject of a previous suspicious activity report (SAR).
To comply with the GTO, FinCEN has published Frequently Asked Questions detailing FinCEN’s expectations, as well as a sample GTO used in this context that details specific reporting requirements. For example, FinCEN has indicated that those U.S. title insurance companies subject to a GTO (including their subsidiaries and agents) should be filing a FinCEN Form 8300 within 30 days of the closing of a transaction covered by the GTO. As is generally the case with Bank Secrecy Act and anti-money laundering (BSA/AML) rules, the penalties for violating the terms of a GTO include both civil and criminal penalties, without limitation, for the company and any of its officers, directors, employees, or agents.
The success of these GTOs in providing “valuable data that is assisting law enforcement” and informing “future efforts to address money laundering concerns in the real estate sector” highlights the likelihood of an increasingly comprehensive regulatory approach in this sector. We will continue to monitor these and other efforts of FinCEN and federal regulators to combat money laundering. Please contact us with questions or for assistance in complying with these or other BSA/AML requirements.