The Financial Crimes Enforcement Network (“FinCEN”) has, once again, extended its Geographic Targeting Order (“GTO”) requiring U.S. title insurance companies to identify the natural persons behind legal entities used in purchases of residential real estate performed without a bank loan or similar form of external financing. Again, the monetary threshold remains at $300,000, and purchases involving virtual currency are within the reach of the GTO, as well as purchases involving “fiat” currency, wires, personal or business checks, cashier’s checks, certified checks, traveler’s checks, a money order in any form, or a funds transfer.
FinCEN also released a related, and slightly updated, response to Frequently Asked Questions (“FAQs”).
We have blogged extensively on this topic, and therefore we will discuss this not-very-surprising development only lightly here. To restate the obvious: U.S. regulators and law enforcement are very interested in the possibility that real estate transactions are serving as a vehicle for money laundering, particularly to the extent that the funds are coming from foreign sources. As we previously have blogged, FinCEN regards the data flowing in from the GTOs as very useful to uncovering potential money laundering schemes.
To keep track, here is the list of affected counties. The recent extension does not add to the previously existing coverage of the GTOs:
- California: San Diego, Los Angeles, San Francisco, San Mateo and Santa Clara Counties
- Florida: Miami-Dade, Broward and Palm Beach Counties
- Hawaii: City and County of Honolulu
- Illinois: Cook County
- Massachusetts: Suffolk and Middlesex Counties
- Nevada: Clark County
- New York: Boroughs of Brooklyn, Queens, Bronx, Staten Island and Manhattan
- Texas: Bexar, Tarrant and Dallas counties
- Washington: King County
Finally, and as we have blogged, on February 13, 2019, Sen. Lindsay Graham (R – S.C.) introduced S. 482 – the Defending American Security from Kremlin Aggression Act of 2019 (“DASKAA”). In part, through DASKAA, Congress is attempting to codify and expand the GTOs. Under DASKAA, title insurance companies would be required to “obtain, maintain, and report to the Secretary information on the beneficial owners of entities that purchase residential real estate in high-value transactions in which the domestic title insurance company is involved.” DASKAA defines “Beneficial Owner” to include any individual or entity who directly or indirectly owns 25% or more of a purchasing entity. FinCEN would be required under the bill to prescribe implementing regulations within 90 days of enactment, which would include establishing a monetary threshold for covered transactions “based on the real estate market in which the transaction takes place.” In essence, DASKAA would make the GTOs permanent and expand them nationwide. To date, the legislative fate of DASKAA is unclear.
Regardless, the latest extension of the FinCEN GTO strongly suggests that FinCEN continues to collect data to support final regulation or legislation in this area.