Search

Editors

Richard L. Cassin Publisher and Editor

Andy Spalding Senior Editor

Jessica Tillipman Senior Editor

Elizabeth K. Spahn Editor Emeritus

Cody Worthington Contributing Editor

Julie DiMauro Contributing Editor

Thomas Fox Contributing Editor

Marc Alain Bohn Contributing Editor

Bill Waite Contributing Editor

Shruti J. Shah Contributing Editor

Russell A. Stamets Contributing Editor

Richard Bistrong Contributing Editor 

Eric Carlson Contributing Editor

Bill Steinman Contributing Editor

Aarti Maharaj Contributing Editor


FCPA Blog Daily News

« Maggie McGaharan: Why law school? | Main | Job: Risk & Compliance Counsel »
Wednesday
Aug232017

FinCEN expands beneficial owner reporting rules for real estate

The Treasury Department's Financial Crimes Enforcement Network added Honolulu Tuesday to a reporting program for real estate deals involving cash transactions.

FinCEN also extended reporting requirements for six other metropolitan areas under a data collection program that started in March 2016.

The new Geographic Targeting Order (pdf) runs through March 20, 2018.

The order is aimed against money laundering through real estate transactions.

It requires title insurance companies to collect and report information about beneficial owners involved in real estate purchases made without a bank loan or other external financing, and made,

at least in part, using currency or a cashier’s check, a certified check, a traveler’s check, a personal check, a business check, or a money order in any form, or a funds transfer.

FinCEN said the real estate sector “can be an attractive avenue for criminals to launder illegal proceeds while masking their identities.”

The order covers transactions:

For $500,000 or more in the Texas county of Bexar

For $1 million or more in the Florida county of Miami-Dade, Broward, or Palm Beach

For $1.5 million or more in the Borough of Brooklyn, Queens, Bronx, or Staten Island in New York City, New York

For $2 million or more in the California county of San Diego, Los Angeles, San Francisco, San Mateo, or Santa Clara

For $3 million or more in the Borough of Manhattan in New York City, New York, and

For $3 million or more in the City and County of Honolulu in Hawaii.

FinCEN said it targeted a narrow segment because of concerns "shell companies are used to buy luxury real estate in all-cash transactions."

In an advisory (pdf) issued Tuesday with the new targeting order, FinCEN used a real-life example.

"A high-profile case illustrating money laundering risks in the real estate sector involves 1Malaysia Development Berhad (1MDB), a Malaysian sovereign wealth fund," FinCEN said.

The advisory said,

In 2016, the U.S. Department of Justice sought forfeiture of over $1 billion in assets -- including luxury real estate—associated with funds stolen by corrupt foreign officials from 1MDB. This included a hotel, two homes, and a mansion in Beverly Hills, CA; a home in Los Angeles, CA; a condominium, two apartments, and a penthouse in New York, NY; and, a townhouse in London, England; all with a collected value estimated at approximately $315 million.

Drug traffickers, corrupt officials, money launderers, and other criminals "seek to exploit real estate transactions to hide their illicit profits, conceal their identities, and launder funds," FinCEN said.

A sample form (pdf) that title insurance companies need to file with the IRS for covered transactions appears on FinCEN's site.

____

Richard L. Cassin is the publisher and editor of the FCPA Blog.