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