A Quick Aid for U.S. Practitioners
On January 13, 2016, the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S Department of Treasury that administers and enforces the U.S anti-money laundering laws (“AML”), issued its first Geographic Targeting Orders (“GTOs”) of 2016.
These GTOs are aimed directly at certain U.S. title insurance companies and their agents and subsidiaries, temporarily requiring them to “identify the natural persons behind companies used to pay “all cash” for high-end residential real estate in New York City, New York, and Miami-Dade County, Florida.” The GTOs will take effect starting March 1, 2016 and end—unless extended—on August 27, 2016.
Reporting Requirements:
The 2016 GTOs require certain title insurance companies to report information on purchases of residential real estate property located in Manhattan for a purchase price of over $3 million and in Miami-Dade County for a purchase price in excess of $1 million.
The purchases must be made without a bank loan or similar external financing and using, at least in part, “currency, cashier’s check, a certified check, a traveler’s check, or any form of money order” (“Monetary Instrument”). These transactions must be made by a “Legal Entity”, defined as a corporation, limited liability company, partnership, or other similar business entity, regardless of jurisdiction (U.S. or non-U.S.) of formation.
What Must Be Reported:
The “Covered Business” (i.e. named title insurance company) must file a FinCEN Form 8300 through the Bank Secrecy Act E-Filing System within 30 days of the closing. The information reported is as follows:
- the identity of the individual primarily responsible for representing the purchaser – the Covered Business must obtain and record a copy of the individual’s driver’s license, passport or similar identifying documentation
- the identity of the purchaser – the Covered Business must obtain and record a copy of the individual’s driver’s license, passport or similar identifying documentation
- the identity of the beneficial owners of the purchaser, with a beneficial owner being any individual who, directly or indirectly, owns 25 percent or more of the equity interests of the purchaser – the Covered Business must obtain and record a copy of each beneficial owner’s driver’s license, passport or similar identifying documentation
- date of the closing
- total amount transferred in the form of a Monetary Instrument • total purchase price of the covered transaction
- address of the real property in the covered transaction
- if the purchaser is a limited liability company, then the name, address and taxpayer identification of all its members must be provided to the extent not otherwise provided on the Form 8300
Looking Forward:
These GTOs are likely to have a substantial impact on the real estate industry. As FinCEN continues to combat money laundering within the real estate sector, Dunnington, Bartholow & Miller will keep its clients apprised of the legal implications and understandings of these GTOs and any subsequent orders. If you have any questions or concerns, please feel free to email Louis Teitel at [email protected].
Louis E. Teitel is a partner in Dunnington’s real estate practice area. He has more than three decades of experience in the New York City real estate market, having counseled landlords, commercial tenants, real estate developers, portfolio investors, joint venture partners, office property managers, cooperative boards, and individuals in all manner of real estate transactions. Mr. Teitel has spoken on real estate law both in the U.S. and abroad, including a lecture series conducted throughout China.
