FinCEN Takes Action to Combat Money Laundering in Real Estate
The Financial Crimes Enforcement Network (FinCEN) has announced the renewal of its Geographic Targeting Orders (GTOs) which require U.S. title insurance companies to identify the natural persons behind shell companies used in non-financed purchases of residential real estate. FinCEN issued a notice of proposed anti-money laundering regulation in the residential real estate sector in February 2024. The comment period for the proposed rule ended on April 16, 2024. Therefore, FinCEN is renewing the GTOs while reviewing and considering all of the comments submitted.
The GTOs will be effective from April 19, 2024, to October 15, 2024, and will cover certain counties and major metropolitan areas in California, Colorado, Connecticut, Florida, Hawaii, Illinois, Maryland, Massachusetts, Nevada, New York, Texas, Washington, Virginia, and the District of Columbia.
The GTOs were first introduced in 2016 and have been renewed and expanded several times since then. They provide valuable data on the purchase of residential real estate by individuals possibly involved in various illicit enterprises. By renewing the GTOs, FinCEN aims to further assist in tracking illicit funds and other criminal activity, as well as continuing to inform its regulatory efforts in this sector. The GTOs have been instrumental in identifying and preventing money laundering in the real estate sector.
Under the GTOs, U.S. title insurance companies are required to identify the natural persons behind shell companies used in non-financed purchases of residential real estate. The purchase amount threshold remains $300,000 for each covered metropolitan area, except for the City and County of Baltimore, where the purchase threshold is $50,000.
In conclusion, the renewal of the GTOs is a positive step towards combating money laundering and other illicit activities in the real estate sector. FinCEN’s continued efforts to regulate this sector will help protect real estate markets from abuse by illicit actors and ensure that the industry remains transparent and accountable.
Sources: FinCEN.gov
Courtney is a Tax Principal in CLA's Real Estate industry group and has more than 17 years of experience providing accounting, tax and consulting services to real estate owners, operators and developers. She also consults with high net-worth individuals and owners of closely-held businesses on all aspects of tax planning.