FinCEN announced on October 20 that, once again, it is extending the Geographic Targeting Order, or GTO, which requires U.S. title insurance companies to identify the natural persons behind so-called “shell companies” used in purchases of residential real estate not involving a mortgage.  FinCEN also has expanded slightly the reach of the GTOs and the FAQs.

The new GTO is here.  FinCEN’s press release is here.  FAQs issued by FinCEN on the GTOs are here.  This is a topic on which we previously have blogged extensively.

The terms of the new GTO are effective beginning October 22, 2023, and ending on April 18, 2024.   The GTO has been expanded, again, to cover the counties of Bristol, Essex, Norfolk and Plymouth in Massachusetts, the counties of Hillsborough, Pasco, Pinellas, Manatee, Sarasota, Charlotte, Lee and Collier in Florida, and the county of Travis in Texas.

The effective period of the GTOs for purchases in these newly added areas begins on November 21, 2023.  The GTO will continue to cover certain counties within the following major U.S. metropolitan areas:  Boston; Chicago; Dallas-Fort Worth; Honolulu; Las Vegas; Los Angeles; Miami; New York City; San Antonio; San Diego; San Francisco; Seattle; parts of the District of Columbia, Northern Virginia, and Maryland (DMV) metropolitan area, the Hawaiian islands of Maui, Hawaii, and Kauai, Fairfield County, Connecticut, and counties encompassing the Texas cities of Houston and Loredo.  The purchase amount threshold remains $300,000 for each covered metropolitan area, with the exception of the City and County of Baltimore, where the purchase threshold is $50,000.

The FAQs were expanded to include this new clarifying item:

9. How has the definition of a Covered Transaction changed from previous GTOs?

Section II.A.2.iii of Real Estate GTOs issued prior to April 2023 defined an element of a Covered Transaction to include where “such purchase is made without a bank loan or other similar form of external financing.” FinCEN has received numerous inquiries from covered businesses about the meaning of “similar form of external financing”, and whether certain real estate purchases qualify. For this reason, and consistent with previous guidance provided in response to such inquiries, the April 2023 GTOs provided a revised definition to reduce confusion and burden for covered businesses. Section II.A.2.iii now includes as an element of a Covered Transaction that “[s]uch purchase is made without a bank loan or other similar form of external financing by a financial institution that has both an obligation to maintain an anti-money laundering program and an obligation to report suspicious transactions under FinCEN regulations appearing in Chapter X of Title 31 of the Code of Federal Regulations.” In other words, if the purchase was made without a loan from a financial institution with AML/CFT program requirements and SAR filing requirements and meets the other criteria in the order, it is a Covered Transaction and a report must be filed.

The GTO renewal is part of FinCEN’s continued focus on the real estate industry.  On October 3, 2023, the Director of FinCEN, Andrea Gacki, addressed the issue of real estate, among other topics, at the Association of Certified Anti-Money Laundering Specialists (“ACAMS”) conference in Las Vegas, Nevada. Director Gacki explained that FinCEN has been examining the money laundering risks and vulnerabilities with certain so-called “gatekeeper” industries, including real estate.  Director Gacki stated that, “[f]or too long, the U.S. real estate market has been susceptible to manipulation and use as a haven for the laundered proceeds of illicit activity, including corruption.”  Director Gacki noted that FinCEN issued on December 6, 2021 an Advanced Notice of Proposed Rulemaking (“AMPRM”) to solicit public comment on potential requirements under the Bank Secrecy Act for certain persons involved in real estate transactions to collect, report, and retain information.  As we have blogged, the ANPRM envisions imposing nationwide recordkeeping and reporting requirements on specified participants in transactions involving non-financed real estate purchases, with no minimum dollar threshold.  According to Director Gacki, FinCEN is “currently developing a Notice of Proposed Rulemaking, the contours of which are still being determined.  FinCEN aims to issue this NPRM later this year.” 

If you would like to remain updated on these issues, please click here to subscribe to Money Laundering Watch. Please click here to find out about Ballard Spahr’s Anti-Money Laundering Team.  Please also check out our detailed chapter on these issues, The Intersection of Money Laundering and Real Estate,