This month, Lesley Muchow discusses FinCEN’s recent extension of its Geographic Targeting Orders (GTOs) through May 19, 2019, and how FinCEN’s most recent efforts to curb money laundering in residential real estate transactions not only expanded the geographic coverage of the orders, but also extended the GTO’s reach beyond just high-end real estate.
Window to the Law: FinCEN’s GTOs Extended and Expanded: Transcript
The Financial Crimes Enforcement Network, one of the U.S. Treasury’s lead agencies in the fight against money laundering, recently announced yet another extension of its Geographic Targeting Orders. The GTOs aim to combat the use of residential real estate in money laundering schemes, and impose additional data collection and reporting requirements on title companies involved in certain “all-cash” residential real estate transactions.
This most recent extension not only carries the GTO’s effectiveness through May 15, 2019, but significantly broadened the orders to include additional geographic areas, additional forms of payment, and perhaps most notably, the orders no longer apply just to high-end transactions.
The good news is that the GTOs do not impose any new obligations on real estate professionals, and with a title company’s obligation to file its report with FinCEN within 30 days of the closing, transactions subject to GTO compliance should not be delayed as a result of these orders.
Before we dive into exactly which real estate transactions are subject to the GTO’s requirements, let’s first take a quick trip around the country to see how the orders have evolved over the past three years.
The first orders were originally issued on March 1, 2016, and applied to "all-cash" high-end residential real estate transactions in the Borough of Manhattan, NY and Miami-Dade County, FL.
Subsequent renewals expanded the orders’ geographic reach to include all of the boroughs in New York City, Broward and Palm Beach Counties in Florida, Bexar County, Texas, several counties in California, and the City and County of Honolulu.
This recent extension brought the most significant expansion yet by extending the geographic reach of the orders to include Cook County, Illinois, Suffolk and Middlesex County, Massachusetts, Clark County, Nevada, Tarrant and Dallas Counties, Texas, and King County, Washington; to now include purchases made using virtual currency;
And, perhaps most notably, the orders no longer apply only to high-end real estate transactions, with a lowered purchase price threshold $300,000 and above.
So, exactly which transactions trigger compliance with the order?
The terms of the order apply to any transaction in which:
residential real estate is purchased by a legal entity;
for a purchase price of $300,000 or more;
in any of the specific geographic areas;
Without a bank loan or similar form of external financing;
And the purchase is made, at least in part, using any of these forms of payment.
While the GTOs do not impose any affirmative obligations on real estate professionals, a title company subject to the GTO may seek a real estate professionals help in obtaining information necessary to meet the title company’s compliance obligations. Real estate professionals are encouraged to assist title companies’ efforts by providing information in their possession that is responsive to the title company’s compliance efforts.
Additionally, real estate professionals can take steps to further FinCEN’s efforts to combat the use of real estate in money laundering schemes. Be sure to review NAR’s Voluntary Anti-Money Laundering Guidelines for Real Estate Professionals, which were created in collaboration with the U.S. Department of Treasury. These guidelines will help you spot potential red flags, such as large, unexplained distances between the location of the property and the buyer, unusual involvement by third parties, or a seller unreasonably under-valuing a property, and also outline ways to report suspicious activity.
And, check out nar.realtor for additional information on the GTOs, the Department of Treasury’s updated strategy for combatting money laundering, and resources to help real estate professionals recognize, and combat money-laundering schemes in real estate.