FinCEN to Expand GTOs on All-cash Real Estate Purchases to Stop Money Laundering

  • Richard Marley
  • November 22, 2022
  • 3 minutes read
  • 336

The Financial Crimes Enforcement Network (FinCEN) has announced the expansion of its GTOs. The new requirements will come into effect from November 25, 2022, and the terms of GTOs will be effective through April 2023.

In addition to Chicago, Boston, Honolulu, Dallas-Fort Worth, Los Angeles,  Las Vegas, Miami, San Antonio, New York City, San Diego, Washington, D.C., Seattle, San Francisco, Maryland area, Fairfield County Connecticut, Northern Virginia, and Baltimore, title insurance firms are now needed by law to submit reports identifying people who made all-cash real estate transactions greater than $300,000 via shell companies in the Houston and Laredo.

The $300,000 filing requirement and the Geographic Targeting Orders (GTOs) were initially created by FinCEN in 2016 for targetting shell firms buying real estate in Miami and Manhattan.

FinCEN claims that by renewing the GTOs, it should be possible to track ill-gotten gains and other illicit activities even better and will help it with future regulatory initiatives in the industry.

“Increasing transparency in the real estate sector will curb the ability of corrupt officials and criminals to launder the proceeds of their ill-gotten gains through the U.S. real estate market,” Acting Director of FinCEN Himamauli Das said. “Addressing this risk will strengthen U.S. national security and help protect the integrity of the U.S. financial system. We urge stakeholders to provide input to assist us in developing an approach that enhances transparency while minimizing the burden on business.”

The National Association of Realtors estimates that 23% of the current purchase, or 518 billion dollars of the 2.25 trillion dollars for existing-home purchases in the year 2021, were made entirely with cash.

FinCEN received more than 150 public comments by the time the ANPRM comment period ended in late February. Even though members of trade associations and organizations like NAR and the American Land Title Association (ALTA) support steps to prevent money laundering activities in the real estate business, they have made it very clear that they are opposed to the new reporting requirements.

The trade organization stated that while it believed the GTOs had demonstrated “to be moderately valuable for law enforcement, the temporary nature of the regime and use of non-real estate specific forms and practices has made the GTOs costly and difficult to implement for the title industry.”

ALTA urged that FinCEN creates “tailored and specific transaction reporting requirements for the all-cash real estate transactions involving corporate entities, instead of imposing a traditional anti-money laundering regime like those imposed on banks.”

Suggested Read: FinCEN Shutting the Channels of Financial Crimes Directed through Shell Companies