Title companies must report all-cash buyers to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN)

The Treasury Department’s Financial Crimes Enforcement Network (FinCEN) announced new rules on January 13, 2016 aimed at all-cash buyers who purchase high-end real estate through shell companies, reports Forbes. The rule will force national title insurance companies to disclose to authorities the identities of buyers in certain geographic areas who purchase real estate for a specific amounts of money. The move is said to be a project that will target loopholes in money laundering laws.

Buyers who must be named;

Real estate news magazine The Real Deal writes that the American Land Title Association (ALTA), which represents the interests of title companies, is seeking to limit the scope of the directive to certain residential transactions. The article describes the balance nationwide title insurance companies will need to strike as something of a “high-wire act” as the industry seeks to comply with rules while guarding client confidentiality.

The Real Deal report notes that the rule is most stringent for LLC entities, where all buyers, whether for residential or commercial real estate closings involving title insurance owner’s policies, must be named. Other entities, such as limited liability partnerships and trusts, only require disclosure for owners with more than a 25-percent stake.

A Quartz article on the new rule points to several high-profile stories illustrating the government’s case, including a $33 million Malibu estate secretly purchased by the son of an African head of state and a New York skyscraper owned by the Iranian government for decades. Both were bought with shell companies.

Program expansion;

A new Geographic Targeting Order was issued on July 22, 2016, effective Effective August 28, 2016 until February 23, 2017, expanding the GTOs to cover the following geographic areas:

– Bexar County, Texas – $500k and above
– Miami-Dade, Broward and Palm Beach counties, Fla. – $1 million and above
– New York City Boroughs of Brooklyn, Queens, Bronx and Staten Island – $1.5 million and above
– San Diego, Los Angeles, San Francisco, San Mateo and Santa Clara counties, Calif. – $2 million and above
– New York City Borough of Manhattan – $3 million and above

The new GTO Requires Reporting of a “Covered Transaction” when a Legal Entity (Corporation; Limited Liability Company; Partnership; or Other similar business entity) purchases Residential Real Estate without a bank loan or similar institutional lender involved, using (even in-part) Currency; Cashier’s Check; Certified Check; Traveler’s Check; Personal Check; Business Check; Money Order.

For more information, visit https://www.fincen.gov/

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