August 1, 2016
On July 27, 2016, the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) announced an expansion of the Geographic Targeting Orders (GTOs) targeting alleged money laundering risk in the real estate sector. Gibson Dunn published a comprehensive client alert on the original GTOs involving Manhattan and Miami-Dade County, Florida, in February 2016 (http://www.gibsondunn.com/publications/Pages/FinCEN-Imposes-Temporary-Reporting-Requirements-on-Title-Insurance-Companies–All-Cash-Luxury-RE-Transactions.aspx), which is supplemented by this client alert. The original GTOs expire on August 27, 2016.
The new GTOs will temporarily require U.S. title insurance companies to identify the natural persons behind shell companies used to pay "all cash" for high-end residential real estate in six major metropolitan areas. In announcing the new GTOs, FinCEN explained that it 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 similar structures.
The new GTOs will be effective on August 28, 2016 for 180 days and cover the following areas: (1) all boroughs of New York City; (2) Miami-Dade County and the two counties immediately north (Broward and Palm Beach); (3) Los Angeles County, California; (4) three counties comprising part of the San Francisco area (San Francisco, San Mateo, and Santa Clara counties); (5) San Diego County, California; and (6) the county that includes San Antonio, Texas (Bexar County). The monetary thresholds for each county vary from $500,000 to $3 million. FinCEN published a table showing these thresholds here (https://www.fincen.gov/news_room/nr/files/Title_Ins_GTO_Table_072716.pdf).
In its press release, FinCEN explained that the initial GTOs have helped law enforcement identify possible illicit activity and are informing future regulatory approaches. In particular, FinCEN reported that 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. 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. According to Treasury officials reported in The Wall Street Journal, more than a quarter of transactions reported in the original GTOs involved someone listed in at least one of the 17 million suspicious activity reports (SARs) filed with FinCEN by financial institutions since shortly after the September 11, 2001, terrorist attacks.
Gibson Dunn lawyers are available to assist in addressing any questions you may have regarding these developments. Please contact the Gibson Dunn lawyer with whom you usually work, or the authors:
Stephanie L. Brooker – Washington, D.C. (+1 202-887-3502, email@example.com)
Joel M. Cohen – New York (+1 212-351-2664, firstname.lastname@example.org)
Andrew A. Lance – New York (+1 212-351-3871, email@example.com)
Judith A. Lee – Washington, D.C. (+1 202-887-3591, firstname.lastname@example.org)
Arthur S. Long – New York (+1 212-351-2426, email@example.com)
Amy G. Rudnick – Washington, D.C. (+1 202-955-8210, firstname.lastname@example.org)
F. Joseph Warin – Washington, D.C. (+1 202-887-3609, email@example.com)
Debra Wong Yang – Los Angeles (+1 213-229-7472, firstname.lastname@example.org)
Linda Noonan - Washington, D.C. (+1 202–887–3595, email@example.com)
Adam M. Smith – Washington, D.C. (+1 202-887-3547, firstname.lastname@example.org)
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