A University of Miami study on money laundering and real estate in the Miami market, published in December 2017, found that work by the title insurance industry was helping stem the tide of illegal money into the market without harming the broader real estate market.
As the Senate considers legislation which would expand the Financial Crimes Enforcement Network (FinCEN) geographic targeting orders (GTOs), which some areas have been under since 2016, to the entire nation, the American Land Title Association (ALTA) is asking for agents’ and underwriters’ help to make that potential process as least burdensome as possible.
“We really are starting to read these tea leaves and think this isn’t going away,” ALTA senior counsel Steve Gottheim said. “So how do we help inform policymakers as they do this? The more stories we can get in, the more anecdotes of what you are seeing, we’d love to hear that. We’d love to shape the conversation as best we can, knowing the arc of this is that something is being done, rather than nothing being done.”
Agents and underwriters who have had experience with transactions under GTOs are encouraged to share their stories with ALTA, either by emailing [email protected] or by calling 202-296-3671. Names and companies involved with stories shared will be kept private unless permission is expressly granted.
In the Miami study, written by Gary McPherson of the University of Miami Business Law Review, researchers said that many professionals in South Florida feared the GTOs would have a “chilling effect on the luxury market,” in real estate.
“The GTOs’ under-inclusiveness provides money launderers with too many avenues to circumvent its reporting requirements, and the GTOs’ ambiguities will cause problems for title insurers that must comply with it,” McPherson wrote. “The same issues that make the GTOs ineffective in preventing money laundering also ensure that the GTOs will not have a significant negative impact on the Miami real estate market — as many feared it would.
“Because the GTO is under-inclusive, it will not cover most of the transactions it was feared to affect the most. The current downturn the market is experiencing is not due to the GTO and is easily explained by the laws of supply and demand. While the GTO will have various effects on the real estate industry, the fear that it would have a ‘chilling effect’ was overblown.”
McPherson added a final chapter to the report, as FinCEN announced late in 2017 that it was extending the GTOs and expanding them to capture a broader range of transactions and include transactions which involved wire transfers.
“These revisions further my argument that a more inclusive drafting of the GTO is necessary to FinCEN’s success in combatting money laundering,” he wrote. “Armed with a more powerful weapon — a revised GTO — I believe FinCEN finally has what it needs to prevail in the fight against money laundering.”