AML push: FinCEN targets anonymous, cash real estate buys in NYC, Miami
Thursday, January 14, 2016 at 9:28AM
Richard L. Cassin in FinCEN, Jennifer Shasky Calvery, Real Estate, Transparency International -USA, anti-money laundering, geographic targetting order

The Treasury Department's Financial Crimes Enforcement Network issued new rules Wednesday to force 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 in Miami-Dade County, Florida.

The Geographic Targeting Orders (GTOs) are aimed at all-cash purchases -- those without bank financing -- that "may be conducted by individuals attempting to hide their assets and identity by purchasing residential properties through limited liability companies or other opaque structures."

In March 2015, Transparency International-USA sent a letter to FinCEN, endorsed by 17 civil society groups, asking for due diligence requirements for professionals in the real estate sector.

TI-USA said in the letter that millions of dollars are spent in the United States on luxury property by people who hide behind anonymous companies, including corrupt overseas officials and organized crime operators.

Before FinCEN acted this week, U.S. law didn't require the real estate industry to carry out background checks on the source of purchase funds or determine ultimate (“beneficial”) owners. Real estate still falls under a 2002 temporary exemption from the PATRIOT Act requirement for anti-money laundering programs.

FinCEN said it is now taking "a risk-based approach" to combating money laundering in the real estate sector.

“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.

The GTOs will require certain title insurance companies to record and report to FinCEN the beneficial ownership information of legal entities purchasing certain high-value residential real estate without external financing, FinCEN said.

FinCEN said by targeting title insurance companies, it is not implying "any derogatory finding."

"To the contrary, FinCEN appreciates the assistance and cooperation of the title insurance companies and the American Land Title Association in protecting the real estate markets from abuse by illicit actors," FinCEN said.

The GTOs will be in effect for 180 days beginning March 1. They will expire initially on August 27, 2016.


Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.

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