FinCEN renews geographic targeting orders again for residential real estate transactions
On October 29, 2021, the Financial Crimes Enforcement Network (FinCEN) of the US Treasury Department announced the renewal for 6 months of existing Geographic Targeting Orders (GTOs) relating to money laundering issues in cash purchases of high-end residential real estate. GTOs were originally issued in july 2016 and have been republished several times, most recently in May 2021. They require US title insurance companies to identify and declare the ultimate beneficial owners of legal entities making certain real estate purchases entirely in cash. The renewed GTOs are identical to the May 2021 GTOs, which covered major metropolitan areas in nine states, kept the monetary threshold lower of $ 300,000 for all jurisdictions, and included virtual currency as a targeted payment method.
These orders remain significantly expanded from the initial GTOs of January 2016 which only targeted two real estate markets – New York and Miami. Renewed GTOs require U.S. title insurance companies to identify the natural persons who are the ultimate beneficial owners of limited liability companies, partnerships and other legal entities involved in residential cash sales of real estate at the following locations :
- Bexar, Tarrant and Dallas counties in Texas;
- Miami-Dade, Broward and Palm Beach counties in Florida;
- The five boroughs of New York City;
- the counties of San Diego, Los Angeles, San Francisco, San Mateo and Santa Clara in California;
- The City and County of Honolulu in Hawaii;
- Clark County, Nevada;
- King County in Washington;
- the counties of Suffolk and Middlesex in Massachusetts; and
- Cook County, Illinois.
The current GTO purchase price threshold remains at $ 300,000. FinCEN apparently finds it useful to set this threshold relatively low overall, given that the geographic scope includes some of the most expensive real estate markets in the country. Previous versions of GTOs had jurisdictional thresholds of up to $ 3,000,000. FinCEN provided a GTO example and GTO frequently asked questions
This is the second renewal of the program under the Biden administration. Given the program renewal without change, we believe that FinCEN will likely continue the GTO program for the foreseeable future and could potentially further expand orders to cover other geographies suspected of being at high risk of money laundering via the luxury real estate. We don’t expect the FinCEN regulations to change significantly under the Biden administration. Depending on the results of the GTOs, FinCEN may also implement other anti-money laundering compliance requirements in the real estate sector. Although there is little publicly available information showing the specific effects or outcomes of GMOs, based on their continued expansion and renewal, FinCEN clearly sees them as a valuable part of its toolbox to combat against money laundering in the real estate sector.
The renewed and expanded GTOs came into effect on November 1, 2021 and will be in effect for 180 days (until April 29, 2022).