6 new counties must report all-cash deals to FinCEN

In January of this year, the federal government announced that title insurance companies in two metropolitan statistical areas (MSAs) — Miami and New York — would have to identify the individuals behind any limited liability corporations (LLCs) that were buying properties at certain price points with cash.

Some experts predicted that this was a temporary move and that the period of investigation (which began March 1 and is supposed to wrap up August 27) would end when it was supposed to without any further action from the federal government.

Well, here’s some evidence that the government is serious about this issue: FinCEN, the United States Department of Treasury’s Financial Crimes Enforcement Network, announced that this rule will be expanded to six new counties in a set of new geographic targeting orders (GTOs):

• Los Angeles County
• San Diego County
• Three counties comprising the San Francisco Bay Area
• The county including San Antonio, Texas

The threshold for scrutiny varies from market to market. For example, the cutoffs in the new California counties surveyed will be for homes $2 million or higher.

This means that buyers paying cash and using an LLC to purchase property that’s priced at $2 million or above in California will be subject to the rule.

In San Antonio, the cutoff is $500,000.

“FinCEN remains concerned that all-cash purchases (i.e., those without bank financing) may be conducted by individuals attempting to hide their assets and identity by purchasing residential properties through limited liability companies or other opaque structures,” said FinCEN in a press release.

“The initial GTOs are helping law enforcement identify possible illicit activity and informing future regulatory approaches. In particular, a significant portion of covered transactions have indicated possible criminal activity associated with the individuals reported to be the beneficial owners behind shell company purchasers,” continued the release. “This corroborates FinCEN’s concerns that the transactions covered by the GTOs (i.e., all-cash luxury purchases of residential property by a legal entity) are highly vulnerable to abuse for money laundering.

“Federal and state law enforcement agencies have also informed FinCEN that information generated by the GTOs has provided greater insight on potential assets held by persons of investigative interest and, in some cases, has helped generate leads and identify previously unknown subjects.”

FinCEN acting director Jamal El-Hindi was also quoted in the release: “The information we have obtained from our initial GTOs suggests that we are on the right track,” he said. “By expanding the GTOs to other major cities, we will learn even more about the money laundering risks in the national real estate markets, helping us determine our future regulatory course.”

Below you can find the list of new markets and the price cutoffs. The new GTOs will go into effect on August 28, 2016, and will remain in effect for 180 days — until February 24, 2017.

And here’s a sample GTO.

We will update this story as more information becomes available. There is no word yet on whether the GTOs surrounding Miami and New York will be expanded to the new February 24, 2017 end date.

Update: A press release sent by ALTA (the American Land Title Association) includes more information, including what appears to be confirmation that Miami and New York counties will have their GTOs extended to February 24, 2017.

Here is the list of the top five things to know about the GTOs that ALTA sent (reprinted word-for-word):

1. New GTOs include all title insurance underwriters
2. Effective date: 180 Days Beginning on August 28, 2016
3. Counties covered and all-cash purchase price thresholds include:
   1. Bexar County (San Antonio), Texas – $500,000+
   2. Miami-Dade, Broward and Palm Beach Counties, Florida – $1,000,000+
   3. New York City Boroughs of Brooklyn, Queens, Bronx and Staten Island – $1,500,000+
   4. New York City Borough of Manhattan – $3,000,000+
   5. San Diego, Los Angeles, San Francisco, San Mateo and Santa Clara Counties, California – $2,000,000+
4. ALTA will continue to work with FinCEN and ALTA members to implement the expanded orders
5. More information and ALTA’s FAQs on the FinCEN GTOs will be updated soon here.

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