FinCEN – Updated as of May 21, 2018

FinCEN has updated their GTO!

Dated as of May 21, 2018

The Financial Crimes Enforcement Network (FinCEN) has changed their Geographical Targeting Order (GTO) and this is effective May 21, 2018. You can see the previous GTO below.

As of May 21, 2018 certain markers have been changed. There may be more areas in California and nationwide that are affected, there may be more types of Buyers that are affected, and there may be a lower sale price threshold. Unfortunately, changed parameters are unknown to the Escrow Companies because there is a “Confidential Agreement” signed between FinCEN and American Land Title Association (ALTA) – the organization representing the underwritten Title Insurance Companies. Apparently, disclosure of any part of this Confidential Agreement by members of ALTA to any third party will carry steep criminal and other penalties. Escrow companies that ARE NOT a part of a Title Insurance Company are considered a “third party” and therefore are not allowed to be privy to any of the new changed circumstances.

Because of this incredible challenge that they are not able elaborate or disclose, many of the Title Companies are going to require their ALTA Information Collection Form be completed by the Buyer, irrespective of sale price, type of Buyer entity or any other previously known markers. They have advised Escrow Companies that they WILL NOT allow a transaction to close and will not issue a Policy of Title Insurance if this form is not completed if requested in that particular file.

Escrow Professionals and concerned real estate agents – Be advised and contact your Title Officer. This Information Collection Form has changed also. You might also want to contact your own legal counsel and advise your client to contact their own attorney, too.

We will keep our clients further apprised as we receive new information.

Any questions regarding this new Geographical Targeting Order must be addressed to the source:

Contact the FinCEN Resource Center to confirm the existence of the GTO for third parties at 1-800-767-2825, 1-703-905-3591 or by email to FRC@fincen.gov.

The website is www.fincen.gov/how-contact-fincen

Juliana Tu, CSEO, CEO, CBSS, CEI, SASIP

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. All transactions that meet certain parameters are considered “Covered” transactions and impacted.

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, wired funds, cashier’s check, certified check, personal check, business check, traveler’s check, and/or money order.

The areas affected in California for purchase price over $2,000,000 are:

  1. San Diego County
  2. Los Angeles County
  3. San Francisco County
  4. San Mateo County
  5. Santa Clara County

The areas outside of California that are affected and their minimum purchase prices are:

  1. Bexar County (San Antonio) Texas – purchases over $500,000
  2. Miami-Dade, Broward, Palm Beach Counties, Florida – over $1,000,000
  3. New York City Boroughs of Brooklyn, Queens, Bronx and Staten Island – over $1,500,000
  4. New York City Borough of Manhattan – $3,000,000

The types of legal entities that must be reported on are:

  1. Limited liability company
  2. Partnership
  3. Corporation

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:

  1. Information about the identity of the individual primarily responsible for representing the purchasing entity;
  2. Information about the purchasing entity including information of the Beneficial Owner (each individual who owns 25% or more of purchase entity); and
  3. 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.

 

Disclaimer:
“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.