The U.S. Department of Treasury’s lead agency in the fight against money laundering, the Financial Crimes Enforcement Network (FinCEN), has released two notices related to money laundering risks associated with real estate transactions.
The first is an Advisory to Financial Institutions and Real Estate Firms and Professionals (FIN-2017-A003) to provide information on money laundering risks for real estate transactions, specifically all-cash luxury market and shell company purchases, and how to detect and report these transactions to FinCEN. The Advisory provides examples of money laundering in the real estate sector, how shell companies and all-cash purchases may be linked to illicit activity, and ways in which real estate professionals’ can voluntarily file suspicious activity reports to further FinCEN’s efforts to combat money laundering.
FinCEN also renewed the Geographic Targeting Orders (GTOs) imposing data collection and reporting requirements on title companies involved in certain high-end real estate transactions. Set to expire on August 22, 2017, FinCEN discovered that about 30 percent of the reported covered transactions in the GTOs were linked to possible criminal activity by the individuals revealed to be the beneficial owners of the shell company purchasers. As a result, FinCEN is extending the GTOs until March 20, 2018, effective September 22, 2017. The GTOs cover the following geographic areas and transactions:
- $500k and above – Bexar County, Texas
- $1m and above – Miami-Dade, Broward, and Palm Beach Counties, Florida
- $1.5m and above – New York City Boroughs of Brooklyn, Queens, Bronx, and Staten Island
- $2m and above – San Diego, Los Angeles, San Francisco, San Mateo, and Santa Clara Counties, California
- $3m and above – New York City Borough of Manhattan
- $3m and above – City and County of Honolulu, Hawaii (new addition)
Pursuant to the recently passed Russian Sanctions law that directed Treasury to allow investigators to obtain additional records to better target illicit Russian activity, the GTOs will now include wire funds transfers.
The GTOs do not impose any new obligations on real estate professionals, except to the extent that a transaction is covered by a GTO and the title company needs to consult with the real estate professional to obtain information necessary to maintain compliance with the order. However, such communications should not affect the real estate sales transaction or timeline for closing as title companies are required to report GTO covered transactions to FinCEN within 30 days of the closing.
For background on real estate professionals’ responsibilities under the law, check out NAR’s voluntary guidelines developed with the help of FinCEN, cited in the latest Advisory.
To learn more about anti-money laundering and FinCEN’s efforts, see NAR’s Window to the Law: New Effort to Combat Money Laundering.
For help recognizing suspicious money laundering activities, see this video created by NAR in partnership with U.S. Treasury Department.