Note, however, that the GTO does not extend to transactions where the purchase is made entirely by wire transfer, but only those purchases made, “at least in part, using currency or a cashier’s check, a certified check, a traveler’s check, or a money order in any form.” See U.S. Dept. of the Treas., Fin. Crimes Enforcement Network Geographic Targeting Orders, January 13, 2016, https://www.fincen.gov/news_room/nr/files/Real_Estate_GTO-NYC.pdf; https://www.fincen.gov/news_room/nr/files/Real_Estate_GTO-MIA.pdf.3See id.4See 31 U.S.C. § 5326; 31 C.F.R. § 1010.370; Treasury Order 180-01.5 Id.6 31 U.S.C. § 5326(d).7 U.S. Dept. of the Treas., Fin. Crimes Enforcement Network Geographic Targeting Order, April 15, 2015, https://www.fincen.gov/news_room/nr/pdf/GTO_Miami.pdf.8 U.S. Dept. of the Treas., Fin. Crimes Enforcement Network Geographic Targeting Order, July 8, 2015, https://www.fincen.gov/news_room/nr/pdf/20150710GTO.pdf.9 U.S. Dept. of the Treas., Fin. Crimes Enforcement Network Geographic Targeting Order, September 26, 2014, https://www.fincen.gov/news_room/nr/pdf/LA_GTO_Order9-25-14.pdf.10 Louise Story, U.S. Will Track Secret Buyers of Luxury Real Estate, N.Y. Times, Jan. 13, 2016, http://nyti.ms/1Oia3JH.11 Anti-Money Laundering Program and Suspicious Activity Report Filing Requirements for Investment Advisers, U.S. Dept. of the Treas., Fin. Crimes Enforcement Network, FINCEN-2014-0003 (proposed Aug. 25, 2015) (to be codified at 31 C.F.R. 103).12Id.

h residents and nonresidents – from acquiring real property in New York, or encourage others to limit or even eliminate their New York holdings.Stay tuned.The opinions expressed herein are solely those of the author(s) and do not necessarily represent the views of the Firm. Remember the 1984 hit by The Romantics?https://www.nytimes.com/2015/02/08/nyregion/stream-of-foreign-wealth-flows-to-time-warner-condos.html. In general, a shell company is a closely held limited liability company that has no physical presence beyond a mailing address and generates little to no independent economic value. According to FinCen, nearly 50 percent of residential real estate sales in Miami-Dade County were all-cash transactions in 2015 and 2016. Tax Law Section 1409 and NYC Admin Code Section 11-2105. https://nyassembly.gov/leg/?default_fld=&leg_video=&bn=A07190&term=2019&Summary=Y&Text=Y. . Financial Crimes Enforcement Network – a division of Treasury. The most recent Order was issued October 22, 2023. 31 U.S.C. Sec. 5326(a); 31 C.F.R. Sec. 1010.370. https://www.fincen.gov/sites/default/files/shared/Phase_17_RRE_GTOs_Order_FINAL_508C.pdf. In 2017, FinCen reported that 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 filed by U.S. financial institutions. In other words, the beneficial owners or purchaser representatives in a significant portion of transactions reported under the GTO had been previously connected to a wide array of suspicious activities. https://www.fincen.gov/sites/default/files/advisory/2017-08-22/Risk%20in%20Real%20Estate%20Advisory_FINAL%20508%20Tuesday%20%28002%29.pdf.https://reinventalbany.org/2023/09/new-data-37-of-manhattan-properties-owned-by-secretive-llc-shell-companies-5x-nys-average/. In contrast to the U.S., member countries of the European Union are required to have corporate registries that include beneficial ownership information.

The Financial Crimes Enforcement Network (“FinCEN”) is statutorily entitled to impose recordkeeping and reporting requirements on domestic financial institutions or nonfinancial trades or business groups when it deems such regulation necessary to carry out the purposes of the Bank Secrecy Act. See 31 U.S.C. § 5326(a); 31 C.F.R. § 1010.370; Treasury Order 180-01. This includes the authority to impose heightened reporting requirements on title insurance companies, and FinCEN has done so pursuant to Geographic Targeting Orders (“GTO”) aimed at reducing the risk of financial crimes in high-risk jurisdictions.FinCEN utilizes GTOs to minimize the likelihood of bad actors successfully laundering money by using illicit funds to procure real estate within the U.S. On October 22, 2023, FinCEN issued an updated GTO covering residential real estate transactions in the following jurisdictions:The Texas counties of Bexar, Tarrant, Dallas, Harris, Montgomery, Webb, or Travis;The Florida counties of Miami-Dade, Broward, Palm Beach, Hillsborough, Pasco, Pinellas, Manatee, Sarasota, Charlotte, Lee, or Collier;The Boroughs of Brooklyn, Queens, Bronx, Staten Island, or Manhattan in New York City, New York;The California counties of San Diego, Los Angeles, San Francisco, San Mateo, or Santa Clara;The Hawaii counties o

FinCEN has consistently been concerned about the opportunities for corrupt officials and illicit actors to launder proceeds of criminal activity through real estate purchases in the U.S. The Geographic Targeting Orders (“GTOs”) initiated by FinCEN under 31 U.S.C. § 5326(a) reflect the regulatory agency’s efforts to effectively control money laundering by imposing specific reporting requirements on title insurance companies involving all-cash residential real estate transactions. While GTOs are helpful in providing important data for money laundering investigations, the regulations are considered to be overly limited in scope and in particular exclude commercial real estate transactions.

[8]FinCEN has not previously imposed the Bank Secrecy Act’s general reporting requirements on businesses involved in non-financed real estate transactions; but it has imposed more specific transaction reporting requirements, mandating that title insurance companies in select metropolitan areas — including New York City — file reports concerning legal entities’ all-cash purchases of residential real estate for more than $300,000.[9] These rules were issued under 31 U.S.C. § 5326, which allows FinCEN to impose additional reporting or recordkeeping requirements on institutions or businesses in a geographic area for a limited period of time, if FinCEN has reasonable grounds to conclude that the requirements are necessary to carry out the purposes of the Bank Secrecy Act. Instead of resorting to these limited rules, FinCEN could impose an ongoing and expanded reporting requirement through 31 U.S.C. § 5318(a)(2).

The GTOs require title companies and their subsidiaries and agents to collect and report information about certain residential real estate transactions in specified jurisdictions. The terms of the orders are effective beginning May 10, 2020 and ending on November 5, 2020.Pursuant to 31 U.S.C. § 5326(a), the Director of FinCEN has the authority to impose certain recordkeeping and reporting requirements on domestic financial institutions or nonfinancial trades or businesses in a geographic area where reasonable grounds exist to prevent money laundering. These orders are only effective for up to 180 days, unless renewed.

31 U.S.C. § 5312(a)(2)(U). While these entities are not required to file SARs under the BSA, they may do so voluntarily.4 31 U.S.C. § 5318(g).5 31 U.S.C. § 5326(a); 31 C.F.R. § 1010.370; U.S. Department of the Treasury, Treasury Order #180-01 (July 1, 2014).6 Public Law No. 115-44 (Aug. 2, 2017), available athttps://www.congress.gov/bill/115th-congress/house-bill/3364/text#toc-H96DAF0AFF3BB4F55A9973F196CC032DB.7See Cadwalader Clients & Friends Memo, FinCEN Targets High-Value Real Estate Transactions in New York and Miami (Jan. 19, 2016), available athttp://www.cadwalader.com/resources/clients-friends-memos/fincen-targets-high-value-real-estate-transactions-in-new-york-and-miami.8See Cadwalader Clients & Friends Memo, FinCEN Tightens the Screws on Money Launderers with Additional Scrutiny of High-Value Residential Real Estate Transactions (Aug. 1, 2016), available athttp://www.cadwalader.com/resources/clients-friends-memos/fincen-tightens-the-screws-on-money-launderers-with-additional-scrutiny-of-high-value-residential-real-estate-transactions.9 The GTO covers purchases of residential real property at certain dollar thresholds per location, inc

Title insurance companies and others involved in closing all-cash residential real estate purchases need to prepare - soon if not immediately - for enhanced regulatory requirements nationwide.1 The Bank Secrecy Act (“BSA”) authorizes FinCEN to issue GTOs upon a finding by the Secretary of the Treasury that additional requirements are necessary to prevent evasion of the BSA’s recordkeeping and reporting provisions. See 31 U.S.C. §5326; 31 C.F.R. §1010.370; Treasury Order 180-01.2 Press Release, U.S. Dept. of the Treas., Fin. Crimes Enforcement Network, FinCEN Expands Reach of Real Estate “Geographic Targeting Orders” Beyond Manhattan and Miami (July27, 2016), https://www.fincen.gov/news_room/nr/html/20160727.html (hereinafter “Expanded GTO Press Release”).3Id.4See Press Release, U.S. Dept. of the Treas., Fin. Crimes Enforcement Network, FinCEN Takes Aim at Real Estate Secrecy in Manhattan and Miami (Jan.13, 2016), https://www.fincen.gov/news_room/nr/html/20160113.html.5 Expanded GTO Press Release.6 New York Public Radio, Feds Expand Money Laundering Probe to All Five Boroughs – and Beyond, July27, 2016, available at http://www.wnyc.org/story/feds-expand-money-laundering-probe-manhattan-all-five-boroughs-and-beyond/.7See, e.g., U.S. Dept. of the Treas., Fin. Crimes Enforcement Network, Sample Geographic Targeting Order, available athttps://www.fincen.gov/news_room/nr/files/Title_Ins_GTO_Sample_072716.pdf.8 Expand

12 The BSA provides for civil or criminal penalties for financial institutions or other persons who violate the Act or its regulations or orders.131 Financial Recordkeeping and Reporting of Currency and Foreign Transactions Act of 1970, 31 U.S.C. § 5311 et seq. (commonly referred to as the “Bank Secrecy Act”). Treasury has delegated to FinCEN its authority to issue GTOs pursuant to 31 U.S.C. § 5326. See Treasury Order 180-01; 31 C.F.R. § 1010.370.2 Press Release, FinCEN, FinCEN Takes Aim at Real Estate Secrecy in Manhattan and Miami (Jan. 13, 2016), https://www.fincen.gov/news_room/nr/pdf/20160113.pdf.

A GTO is an order issued by the United States secretary of the Treasury requiring all domestic financial institutions that exist within a geographic area to report on transactions any greater than a specified value. GTOs are authorized by the Bank Secrecy Act in 31 U.S.C. § 5326(a). Originally, GTOs were only permitted by law to last for 60 days, but that limitation was extended by the USA Patriot Act to 180 days.