Consistent with the trend we noted previously, FinCEN has expanded its real-estate focused Geographic Targeting Orders (GTOs). The new GTOs target real estate transactions beyond Manhattan and Miami to include six geographic areas: all boroughs of New York City, and counties in or near Miami FL, Los Angeles CA, San Francisco CA, San Diego CA, and San Antonio TX. FinCEN’s initial real estate GTOs, issued in January 2016, covered only Manhattan and Miami.
GTOs generally work as temporary, geographically limited, anti-money laundering regulations that help FinCEN to gain more transparency in an area of concern and, if appropriate, take more permanent regulatory action.
These new expanded GTOs, similar to the ones issued in January (which we discussed here), will require title insurance companies to identify and report to FinCEN the natural persons behind shell companies used to pay for high-end residential real estate acquired without financing (i.e., “all-cash” transactions). Through this expansion, FinCEN aims to gain more insight into this area, including possible illicit activity, and to inform future regulatory approaches to these transactions. FinCEN explained that “a significant portion” of the transactions reported under the initial GTOs indicated possible criminal activity. These findings corroborate FinCEN’s concerns that all-cash real estate transactions are vulnerable to abuse for money laundering.
In our previous post, we discussed FinCEN’s increasing use of Geographic Targeting Orders (GTOs), and this appears to be another step in that direction. As we explained in that post, GTOs sometimes can pave the way for broader, permanent actions. While FinCEN seems to still be testing the waters here, more permanent regulations could follow if FinCEN determines they are appropriate based on the information they obtain.