The Financial Crimes Enforcement Network (FinCEN) on Nov. 15 announced the issuance of revised Geographic Targeting Orders (GTOs) that require U.S. title insurance companies to identify the natural persons behind shell companies used in all-cash purchases of residential real estate. The purchase amount threshold, which previously varied by city, is now set at $300,000 for each covered metropolitan area.
FinCEN also is requiring that covered purchases using virtual currencies be reported. The terms of the order are effective from Nov. 17, 2018, to May 15, 2019.
Previous GTOs provided valuable data on the purchase of residential real estate by persons implicated, or allegedly involved, in various illicit enterprises including foreign corruption, organized crime, fraud, narcotics trafficking, and other violations, the agency said. Reissuing the GTOs will further assist in tracking illicit funds and other criminal or illicit activity, as well as inform FinCEN’s future regulatory efforts in this sector.
The terms of the order are not confidential, unlike the last GTO. In May, The Legal Description learned that FinCEN issued a new Geographical Targeting Order (GTO) that took effect May 21, 2018. That order included a confidentiality provision, Steven Day, president National Agency Operations, Fidelity National Title Group and past president of the American Land Title Association told attendees at the National Settlement Services Summit (NS3) in June.
“FinCEN included in the order a confidentiality provision, which says I can’t talk about where the order is effective, who it impacts, what the amounts are,” Day told NS3 attendees. “And their reasoning behind that is that they feel that gives the wrongdoers more information, more opportunities to get around the schemes.”
The latest GTOs 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; and Seattle.
Under the order, if a covered business is involved in a covered transaction (a residential real estate transaction of $300,000 or more, in one of the listed counties where the purchase is made at least in part in cash, check, money order, fund transfer or virtual currency), they must report the transaction by filing a FinCEN currency transaction report within 30 days of closing. The currency transaction report must include information about the individual primarily responsible for representing the legal entity and obtaining a copy of the individual’s driver’s license or other identifying documentation.
They also would have to include information about the identity of the beneficial owners of the legal entity. The order defines “beneficial owner” as “each individual who, directly or indirectly, owns 25 percent or more of the equity interests of the legal entity purchasing real property in the covered transaction.” It defines “legal entity” as “a corporation, limited liability company, partnership or other similar business entity, whether formed under the laws of a state, or of the United States, or a foreign jurisdiction.
Covered businesses must supervise and be responsible for compliance by each of its officers, directors, employees and agents with the terms of the order and transmit the order to each of its agents, as well as its CEO or similarly acting managers.
FinCEN said in a news release accompying the order that it appreciates the continued 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.