- within Intellectual Property, International Law, Litigation and Mediation & Arbitration topic(s)
The Financial Crimes Enforcement Network ("FinCEN") reportedly extended a Geographic Targeting Order ("GTO") originally imposed in 2016 to flag potential money-laundering issues concerning the use of legal entities to purchase residential real estate. The extension has not yet been confirmed by the U.S. Treasury Department. The six-month temporary GTO, which was renewed in August 2017, requires U.S. title insurance companies to identify the natural persons behind shell companies used to purchase high-end residential real estate in select markets, including New York, Miami, Los Angeles, San Francisco, San Diego, San Antonio and Honolulu. While the GTO originally applied only to cash deals, it was broadened in 2017 to cover transactions involving wire transfers as well.
The report states that the GTO, which was set to lapse on March 20, 2018, has been renewed through September 16, 2018. Its operative provisions are expected to remain the same, including the market-specific thresholds that trigger reporting obligations. Title insurance companies that must report on a covered transaction do so by filing a FinCEN Form 8300 within 30 days of closing.
Commentary / Joseph V. Moreno
If accurate, this latest GTO extension is evidence that FinCEN views the program as a success and the information collected as worthwhile in its fight against money laundering within the real estate industry. It is also a further step in what may ultimately become a permanent regime to report on the beneficial owners behind shell companies used in real estate transactions, similar to the customer due diligence rules about to go into effect in May 2018 for new bank accounts opened with U.S. financial institutions. The question remains whether such a regime would remain narrowly tailored to title insurance companies in select residential markets, or expand to potentially include commercial real estate and other parties involved in such transactions, such as lenders and attorneys.
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.
[View Source]
