Geographic Targeting Order (GTO)

On Friday, the Department of Justice (“DOJ”) filed a civil forfeiture complaint in the Southern District of Texas seeking recovery of approximately $144 million in assets that allegedly represent the proceeds of foreign corruption and which were laundered in and through the U.S. The complaint’s narrative focuses on Diezani Alison-Madueke, who is Nigeria’s former Minister for Petroleum Resources.  The 52-page complaint, which contains additional attachments, is very detailed – but nonetheless interesting reading – so we will discuss here only three salient points:

  • The most eye-catching property subject to forfeiture, the spectacular yacht Galactica Star (which you can inspect here), apparently has no discernible nexus to the U.S. – except that the funds used to acquire the yacht allegedly were transferred through correspondent bank accounts at financial institutions which process their U.S. dollar wire transactions through the U.S.
  • The complaint emphasizes the continued enforcement focus on high-end U.S. real estate as a potential vehicle for money laundering from abroad.
  • The complaint purports to quote a recording of a conversation allegedly made by Ms. Alison-Madueke herself, in which she allegedly offers a co-schemer some critiques on his approach to laundering illicit funds.

Continue Reading Alleged Nigerian Oil Industry Corruption and Civil Forfeiture: More Extraterritorial Application of U.S. Law; More High-End Real Estate; and Advice on Laundering

This week, we have the opportunity to lead a discussion with real estate industry professionals about AML and CFT trends at the Real Estate Services Providers Council, Inc. (RESPRO®) Annual Conference in Las Vegas. We have written several times in this blog about the real estate industry, including the 2017 extension of the GTOs for title insurance companies, other recent FinCEN activities, and the FATF’s conclusions regarding real estate in their 2016 Mutual Evaluation Report.

We are very pleased that Anne Marie Minogue of Navigant will be joining us on the panel. The real estate industry operates differently in different states and efforts to enhance AML and CFT supervision and enforcement will need to reflect this complexity. RESPRO members include a broad range of industry participants that will be affected by further actions by FinCEN so we are looking forward to the discussion.Beautiful Swimming Pool at an Estate Home

FinCEN announced today that it is renewing the existing Geographical Targeting Orders (GTOs) issued in July 2016 that require all title insurance companies to identify and report on the natural persons behind shell companies that make cash-only purchases of high-end real estate in six major metropolitan markets. The renewed GTOs will be in effect from February 24, 2017 through August 22, 2017.

The initial real estate GTOs were issued to certain title insurance companies (including their subsidiaries and agents) in January 2016 for purchases in the Borough of Manhattan and Miami-Dade County. The July 2016 orders being renewed today expanded the scope of the GTOs to cover all title insurance companies and to include numerous counties in six major metropolitan areas.

The renewal of the GTOs was anticipated. In today’s new release, FinCEN noted that it “has found that about 30 percent of the transactions covered by the GTOs involve a beneficial owner or purchaser representative that is also the subject of a previous suspicious activity report.”

As highlighted in our 2016 Year in Review, FinCEN has increased its focus on AML risks in real estate. We expect FinCEN to further expand their supervisory and enforcement activity in the real estate market, as recommended by the FATF in their 2016 Mutual Evaluation Report.

In January 2016, FinCEN issued two geographic targeting orders (GTOs) aimed at combating money laundering in all-cash real estate transactions in the Borough of Manhattan, New York, and Miami-Dade County, Florida—two areas identified by FinCEN as having “a higher than average percentage of all-cash transactions.” The GTOs, which took effect in March 2016, required certain title insurance companies to identify the natural persons behind entities using cash to purchase high-end real estate—properties with a sales price of more than $1 million in Miami-Dade County and more than $3 million in Manhattan.

Continue Reading 2016 Year in Review: Real Estate Risks and Mortgage Lender Compliance – FinCEN’s Increasing Focus on AML Risks in Real Estate

The December 2016 FATF Mutual Evaluation Report on the United States’ Measures to Combat Money Laundering and Terrorist Financing repeatedly highlighted the need for U.S. regulators and the real estate industry to do more to address money laundering and terrorist financing risks.

The FATF report identified “high-end real estate” transactions as an area needing priority action. In the report, the FATF assessors recommend that FinCEN take further action after analyzing the outcomes from FinCEN’s 2016 GTOs for high-end cash transactions in several U.S. real markets.

Continue Reading 2016 Year in Review: FATF Report Highlights Real Estate Risks and Mortgage Lender Compliance Shortcomings