On January 13, FinCEN issued two Geographical Targeting Orders (GTO) requiring certain U.S. title insurance companies to provide identification for certain “all-cash” buyers of high end real estate, and to report such transactions. One GTO focuses on the Borough of Manhattan in New York City, New York and the other focuses on Miami-Dade County, Florida.
According to FinCEN, natural persons may be purchasing real estate without bank financing and through LLCs or “other opaque structures” in an attempt to hide their assets and identity. FinCEN commented: “Having prioritized anti-money laundering protections on real estate transactions involving lending, FinCEN’s remaining concern is with money laundering vulnerabilities associated with all-cash real estate transactions.” The two GTOS will be effective from March 1, 2016 through August 27, 2016, and will require certain title insurance companies to “record and report to FinCEN the beneficial ownership information of legal entities purchasing certain high-value residential real estate without external financing.”
The GTOs are identical with the exception of the purchase price value applicable to the different locations. For purchases exceeding $3 million in the Borough of Manhattan, or $1 million in Miami-Dad County, that are made by a legal entity (as defined in the GTO), “without a bank loan or other similar form of external financing,” where “the purchase is made, at least in part, using currency or a cashier’s check, a certified check, a traveler’s check, or a money order in any form,” a title insurance company, and any of its subsidiaries and agents, is required to file a Form 8300 within 30 days of closing.
Among other information, the Form 8300 must:
- Contain information about the identity of the individual primarily responsible for representing the Purchaser, including a copy of this individual’s driver’s license, passport, or other similar identifying documentation.
- Contain information about the identity of the Purchaser.
- Contain information about the identity of the Beneficial Owner(s) of the Purchaser. The Covered Business must obtain and record a copy of the Beneficial Owner’s driver’s license, passport, or other similar identifying documentation. A “Beneficial Owner” means each individual who, directly or indirectly, owns 25% or more of the equity interests of the Purchaser.
- If the purchaser involved in the Covered Transaction is a limited liability company, then the Covered Business must provide the name, address, and taxpayer identification number of all its member
This development is consistent with FinCEN’s long-term trend of pushing for greater transparency, exemplified by its pending proposed rule that would mandate enhanced customer due diligence related to beneficial ownership.