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Harry Cassin
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Richard L. Cassin
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Thomas Fox
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FinCEN extends ‘beneficial owner’ rules for big real estate deals

The Treasury Department’s Financial Crimes Enforcement Network renewed rules Thursday that force U.S. title insurance companies to identify the natural persons behind companies used to pay all cash for high-end residential real estate in some parts of the country.

FinCEN’s Geographic Targeting Orders (GTOs) cover:

  • All boroughs of New York City
  • Miami-Dade County and the two counties immediately north (Broward and Palm Beach)
  • Los Angeles County
  • Three counties comprising part of the San Francisco area (San Francisco, San Mateo, and Santa Clara counties)
  • San Diego County, and
  • The county that includes San Antonio, Texas (Bexar County).

The GTOs target purchases made without a bank loan or other external financing.

Covered in Bexar, Texas are cash property deals with a total purchase price of $500,000 or more.

In Miami-Dade, Broward, and Palm Beach, deals worth $1 million or more are covered.

The threshhold for Brooklyn, Queens, Bronx, and Staten Island is $1.5 million, and $3 million or more in Manhattan.

In San Diego, Los Angeles, San Francisco, San Mateo, and Santa Clara, the order covers cash purchases of $2 million or more.

FinCEN said this week about 30 percent of the transactions covered by the GTOs involve a beneficial owner or purchaser representative who is also the subject of a previous suspicious activity report.

“This corroborates FinCEN’s concerns about the use of shell companies to buy luxury real estate in ‘all-cash’ transactions,” FinCEN said.

The GTOs first came into effect on March 1, 2016. The latest renewal extends the orders for 180 days  beginning February 24.

In March 2015, Transparency International-USA sent a letter to FinCEN, endorsed by 17 civil society groups, asking for due diligence requirements for professionals in the real estate sector.

TI-USA said in the letter that millions of dollars are spent in the United States on luxury property by people who hide behind anonymous companies, including corrupt overseas officials and organized crime operators.

Before FinCEN acted last year, U.S. law didn’t require the real estate industry to carry out background checks on the source of purchase funds or determine ultimate or beneficial owners. Real estate still falls under a 2002 temporary exemption from the PATRIOT Act requirement for anti-money laundering programs.

FinCEN said by targeting title insurance companies it is not implying “any derogatory finding.”

“To the contrary, FinCEN appreciates the continued assistance and cooperation of the title insurance companies and the American Land Title Association in protecting the real estate markets from abuse by illicit actors,” the regulator said.

FinCEN published a sample of the form (pdf) title insurance companies need to file for covered transactions.


Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.

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