August 30, 2016
Author: Juliana Tu
FinCEN? GTO? What is that?
In February 2016 I reported on my NewsBlog that the Department of Treasury, through the Financial Crimes Enforcement Network (“FinCEN”), started an initiative in Manhattan, NY and Miami- Dade County, FL requiring real estate companies to disclose customer identities for high end “all cash” real estate purchases. Apparently, “illicit” money (aka money laundering) was found in 26 cases. Now, FinCEN has expanded their initiative.
Under the new Geographic Targeting Orders (GTO), Title and Escrow Agents must collect and report internal information of legal entities Buyers involved in certain residential real estate transactions in which it is cash only to complete the purchase price and there is no institutional loan. At this time the GTO effective date is 180 days, starting from 8/28/2016 and ending 2/23/2017. All transactions closing between these dates must be reported if impacted (“Covered” transactions).
For purposes of the GTOs, “residential real property” means 1-4 SFR, including condos and cooperatives.
A “cash only” transaction is described as a transaction that has no institutional loan and where any portion of the transaction is paid in cash, cashier’s check, certified check, personal check, business check, traveler’s check, and/or money order. EXEMPTION: Any escrow transaction that is closed with all funds, including EMD and final closing funds, wired to the Escrow Holder, is exempt.
The areas affected in California for purchase price over $2,000,000 are:
- San Diego County
- Los Angeles County
- San Francisco County
- San Mateo County
- Santa Clara County
The areas outside of California that are affected and their minimum purchase prices are:
- Bexar County (San Antonio) Texas – purchases over $500,000
- Miami-Dade, Broward, Palm Beach Counties, Florida – over $1,000,000
- New York City Boroughs of Brooklyn, Queens, Bronx and Staten Island – over $1,500,000
- New York City Borough of Manhattan – $3,000,000
The types of legal entities that must be reported on are:
- Limited liability company
Please click this link to our “Flow Chart” of California transactions only, which shows just how this GTO works.
Escrow Agents must alert their clients that the following information must be given to the title companies to meet the requirement and sufficiently complete IRS Form 8300:
- Information about the identity of the individual primarily responsible for representing the purchasing entity;
- Information about the purchasing entity including information of the Beneficial Owner (each individual who owns 25% or more of purchase entity); and
- Copies of current valid driver license or passport for items 1 and 2 above.
Escrow Agents will be instructed by the Title Company to complete an Affidavit stating whether their residential real estate transaction is a Covered transaction which will fall under the GTO.
For additional information, please go to the FinCEN FAQ page.
“This article and its accompanying flow chart is provided for informational purposes only. Viva Escrow! Inc. provides no legal advice and assumes no responsibilities or liabilities for the accuracy. Consult your own legal and financial counsel with respect to your particular transactional questions or issues.”
Please feel free to forward our web article to others in your office who may be impacted.