On November 8, 2019, the Financial Crimes Enforcement Network (FinCEN) announced the renewal of its Geographic Targeting Order (GTO) for the reporting of real estate transactions in twelve metropolitan areas. The renewed order goes into effect today, November 12th.
The current GTO stems from an initial order issued by FinCEN in January 2016, which applied only to certain areas within New York City and Miami. FinCEN has renewed and expanded the orders approximately every six months since 2016.
FinCEN noted that the transaction data collected through the use of GTOs has provided useful information about persons implicated in various illicit activities, including corruption, organized crime, narcotics trafficking, and other violations, and that reissuing GTOs will continue to help track illicit funds and other criminal activity.
What is a GTO?
A GTO is an order issued by the director of FinCEN, pursuant to the Bank Secrecy Act (BSA), that imposes data collection and reporting requirements for transactions over a specified value.
What is the specified reporting value in the current GTO?
The purchase threshold for reporting remains $300,000 for each covered area.
What does the renewed GTO require?
According to the renewed GTO, U.S. title insurance companies must identify and report the natural persons behind corporate entities making "all cash" purchases of residential real estate in certain counties within specified metropolitan areas. For real estate purchases to which the GTO applies, the title insurance company is required to complete a FinCEN Form 8300. The only difference between the renewed GTO and its May 2019 counterpart, is that reporting of purchases made by U.S. publicly-traded companies is not required, since such purchases can be identified through other business filings.
What are "all cash" purchases?
All cash purchases refer to transactions that do not involve external financing. It includes purchases made via wire transfer.
Which geographic areas does the GTO cover?
The GTO covers purchases of high-end residential real estate within certain counties in 12 major metropolitan areas: Boston; Chicago; Dallas-Fort Worth; Honolulu; Las Vegas; Los Angeles; Miami; New York City; San Antonio; San Diego; San Francisco; and Seattle. The purchase of luxury residential real estate by shell companies for purposes of money laundering has been found to be particularly high in these markets.
How long does the GTO remain in effect?
GTOs are meant to be temporary measures. They can be in effect for up to 180 days, at which time they can be renewed. The terms of this order are effective beginning November 12, 2019 and ending on May 9, 2020.
Who is subject to the GTO?
The GTO applies to U.S. title insurance companies, their subsidiaries, and agents ("Covered Businesses").
Are there penalties for violating a GTO?
Yes, criminal and civil penalties apply for violations of a GTO. Liability may apply to the Covered Business and any of its officers, directors, employees, or agents.
Read FinCEN's news release, with a link to the GTO, here: https://www.fincen.gov/index.php/news/news-releases/fincen-reissues-real-estate-geographic-targeting-orders-12-metropolitan-areas-0
For FAQs regarding the renewed GTOs, see here: https://www.fincen.gov/sites/default/files/shared/FAQs%20on%20Real%20Estate%20GTO%20FINAL%2011.8.2019.pdf