- Honolulu is the seventh major metro area required to report all-cash real estate deals above a certain dollar amount to the Financial Crimes Enforcement Network.
Welcome to the club, Honolulu!
The Hawaiian metropolitan area is the latest to join a list of cities and counties that have to report all-cash real estate deals above a certain dollar amount to the Financial Crimes Enforcement Network (FinCEN); FinCEN is also “revising the GTOs [Geographic Targeting Orders] to capture a broader range of transactions and include transactions involving wire transfers,” the network said in a statement.
FinCEN issued its first set of GTOs in January 2016 and has been extending the GTOs every six months since then, occasionally adding a new market. The GTOs dictate that title insurance companies must identify the human beings behind any “shell companies” used to pay for “luxury” residential real estate at or above certain price points.
Right now, title insurance providers in these areas are required to disclose the people behind any buyer shell companies:
- All boroughs of New York City (for residential properties more than $1.5 million)
- Miami-Dade, Broward and Palm Beach counties in Florida (for residential properties more than $1 million)
- Los Angeles County (for residential properties more than $2 million)
- San Diego County (for residential properties more than $2 million)
- Three counties comprising the San Francisco Bay Area (for residential properties more than $2 million)
- The county including San Antonio, Texas (for residential properties more than $500,000)
- The city and county of Honolulu, Hawaii (for residential properties more than $3 million)
The price point in Honolulu is the highest so far — FinCEN will require title companies in the city and county to disclose the identities behind shell corporations purchasing residential real estate for $3 million or more.
“Many real estate transactions involve high-value assets, opaque entities, and processes that can limit transparency because of their complexity and diversity,” FinCEN wrote in an advisory. “In addition, the real estate market can be an attractive vehicle for laundering illicit gains because of the manner in which it appreciates in value, ‘cleans’ large sums of money in a single transaction, and shields ill-gotten gains from market instability and exchange-rate fluctuations.”
FinCEN added that the efforts seem to be paying off.
“As of May 2, 2017, over 30 percent of the real estate transactions reported under the GTOs involved a beneficial owner or purchaser representative that had been the subject of unrelated Suspicious Activity Reports (SARs) filed by U.S. financial institutions,” FinCEN said in its advisory. That seems like a quite a lot of alleged suspicious actors trying to buy real estate.
“This corroborates FinCEN’s concerns about this small segment of the market in which shell companies are used to buy luxury real estate in ‘all-cash’ transactions,” FinCEN said in its release. “In addition, feedback from law enforcement indicates that the reporting has advanced criminal investigations. The expanded GTOs will further help law enforcement and inform FinCEN’s future efforts to assess and combat the money laundering risks associated with luxury residential real estate purchases.”
Read the advisory, the new GTO and frequently asked questions about the GTOs below.
