FinCEN takes aim at real estate secrecy

The Financial Crimes Enforcement Network recently issued Geographic Targeting Orders that will temporarily require certain U.S. title insurance companies to identify the natural persons behind companies used to pay “all cash” for high-end residential real estate in the Borough of Manhattan in New York City, and Miami-Dade County, Fla.

FinCEN is concerned that all-cash purchases (i.e., those without bank financing) may be conducted by individuals attempting to hide their assets and identity by purchasing residential properties through limited liability companies or other opaque structures. To mitigate this potential money laundering vulnerability, FinCEN will require certain title insurance companies to identify and report the true “beneficial owner” behind a legal entity involved in certain high-end residential real estate transactions in Manhattan and Miami-Dade County, according to a news release.

“We are seeking to understand the risk that corrupt foreign officials, or transnational criminals, may be using premium U.S. real estate to secretly invest millions in dirty money,” FinCEN Director Jennifer Shasky Calvery said in the release. “Over the years, our rules have evolved to make the standard mortgage market more transparent and less hospitable to fraud and money laundering. But cash purchases present a more complex gap that we seek to address. These GTOs will produce valuable data that will assist law enforcement and inform our broader efforts to combat money laundering in the real estate sector.”

According to the release, the GTOs will require certain title insurance companies, under specific circumstances, to record and report to FinCEN the beneficial ownership information of legal entities purchasing certain high-value residential real estate without external financing. They will report this information to FinCEN where it will be made available to law-enforcement investigators as part of FinCEN’s database. The information gathered from the GTOs will advance law enforcement’s ability to identify the natural persons involved in transactions vulnerable to abuse for money laundering, mitigating a key vulnerability associated with these transactions — the ability for individuals to disguise their involvement in the purchase, according to the release.

FinCEN is covering certain title insurance companies because title insurance is a common feature in most real estate transactions.

The GTOs went into effect March 1 and will expire Aug. 27.

By |2019-11-25T08:25:47-06:00June 13th, 2016|Financial Services|0 Comments

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