For those involved in high-dollar residential real estate transactions, two new Geographic Targeting Orders (“GTOs”) issued by the Financial Crimes Enforcement Network (“FinCEN”) of the U.S. Department of the Treasury may affect your transaction.
Concerned about the utilization of all-cash purchases of high-end residential real estate by individuals attempting to hide their assets, FinCen is requiring title insurance companies and their agents to report certain information regarding all-cash purchases (made without a bank loan or other form of external financing) that exceed U.S. $1M in Miami and $3M in Manhattan. Most notably, title insurance companies and their agents are required to report the natural persons behind companies who pay all-cash for residential real estate valued above the $1M threshold in Miami and $3M threshold Manhattan. Reports must be made to FinCEN within 30 days post-closing and records of the transaction must be retained for five years.
The GTOs require the title company or its agent to report, among other things, the following:
- The identity of the individual primarily responsible for representing the purchasing entity and a copy of the individual’s driver’s license, passport, or other similar identifying documentation.
- The identity of the beneficial owner of the purchasing entity.
- Total purchase price and the amount transferred in the form of cash, a cashier’s check, a certified check, a traveler’s check, or a money order in any form.
For now the orders are temporary, with the GTOs effective between March 1, 2016 and August 27, 2016, as FinCen tries to understand the risk involved with the targeted transactions. “We are seeking to understand the risk that corrupt foreign officials, or transnational criminals, may be using premium U.S. real estate to secretly invest millions in dirty money,” said FinCen Director Jennifer Calvery.
Being aware of these requirements ahead of any transaction subject to the GTOs can save a title insurance company or its agent pain and heartache as tracking down the individuals post-closing to gather the required information could prove difficult. Furthermore, the GTOs expressly provide that those title insurance companies and any of its officers, directors, employees, and agents may be liable, without limitation, for civil or criminal penalties for violating the terms of the GTOs.
Please read here the full Geographic Targeting Order for Miami and New York.
