The Financial Crimes Enforcement Network (FinCen) of the U.S.
Treasury Department has established a temporary program that
requires new disclosures by title insurance companies. The program
is part of FinCen's effort to gather data that will assist law
enforcement agencies in combating money laundering in cities where
high-end real estate acquisitions have become increasingly common.
Under this program, title insurance companies must disclose the
identities of the individuals behind shell companies (including
limited liability companies, corporations and partnerships) that
buy high-end residential properties (1 to 4 family dwellings or
condominium units) in Manhattan and Miami-Dade County without
lender financing. Note that these requirements apply only to
purchases in Manhattan and Miami-Dade County. They do not apply to
purchases in New York outside Manhattan or to purchases in Florida
outside Miami-Dade County. The program is currently scheduled to
run from March 1, 2016, to August 27, 2016, as part of a 180-day
trial period. This period may be extended by further
Which Transactions Are Covered
In Manhattan, the initiative requires the reporting of the
identities of the beneficial owners of the equity interests in the
purchasing entities in "all cash" sales of more than US$3
million. In Miami-Dade County, the identities of the beneficial
owners must be reported on "all cash" sales of more than
US$1 million. Note that only transactions that do not involve any
bank financing are covered. Furthermore, this reporting requirement
applies only when a portion of the purchase price is paid by
currency or monetary instrument, which includes cashier's
check, certified check, traveler's check or money order. The
reporting requirement does not apply if the purchase price is paid
entirely by wire transfer.
Who Must Report and What Must Be Reported
The title insurance company that is involved in each of the
covered transactions must disclose the identities of the
individuals who are the ultimate beneficial owners or holders of
25% or more of the direct or indirect equity or beneficial
interests in the purchasing entity for all covered transactions.
There is no reporting requirement for those transactions in which
title insurance companies are not involved.
How to Comply with the Reporting Requirement
Within 30 days of the closing of a real estate transaction for
which the reporting requirement applies, title insurance companies
must complete the FinCen FORM 8300 through the Bank Secrecy Act
e-filing system (available online). FinCen will store this information in
an internal database not available to the public. FinCen has stated
that this database cannot be accessed through public sources and
will be made available only to law enforcement agencies. The
collection of this information will be exempt from the Freedom of
Information Act, which, without an exemption, allows for the full
or partial disclosure of previously unreleased information and
documents controlled by the U.S. government.
Those contemplating purchases of residential properties in
Manhattan and Miami-Dade County that meet the criteria described
above should take these new reporting requirements into
consideration. However, even if privacy considerations are
paramount, these reporting requirements should not be a significant
concern since the identities of the beneficial owners will not
appear in any public records or databases.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Russell v. Township of Georgian Bay provides a useful reminder of the fact that while municipal officials sometimes appear to hold all of the cards in disputes with home owners, that is not always the case.
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