Editor’s note: In the fifth installment of our series, the ACAMS moneylaundering.com legal team covers the U.S. government’s use of geographic targeting orders, or GTOs, to gather financial intelligence on the real estate sector.
In August 2014, the Treasury Department’s Financial Crimes Enforcement Network, or FinCEN, published the first of a batch of several GTOs in the past five years, placing companies involved in carrying cash in bulk between Mexico and California under enhanced border-declaration rules.
Subsequent GTOs aimed to generate investigative leads on the flow of illicit cash through the L.A. Fashion District and electronics firms near Miami International Airport.
The bureau turned its sights to the U.S. real estate market in January 2016, ordering title insurance firms to identify individuals owning at least 25 percent of a legal entity using only cash, cashier’s checks, certified checks, traveler’s checks or money orders to acquire $3 million or more of residential property in Manhattan, or $1 million or more in Miami.
FinCEN has renewed the real estate GTOs several times and expanded them to cover property in Los Angeles, the two counties immediately north of Miami, San Francisco, San Diego, San Antonio, Honolulu and all of New York City. Payments in wire transfers, cryptocurrencies and other financial instruments have been covered since August 2017.
The GTOs were expanded again in May 2018, this time on a confidential basis, to cover real estate in Chicago, Dallas, Las Vegas and other major cities. That expansion, which FinCEN renewed three months ago, came with a dramatically lower reporting threshold of $300,000.
The quasi-permanence of the real estate GTO is partially a result of the program’s success. An academic study published last year found that all-cash, corporate acquisitions of luxury property in South Florida dropped 75 percent from January 2016 to October 2016, while purchases elsewhere, including in Manhattan, averaged a 50 percent drop.
GTOs have also proven popular with federal investigators, who can now obtain valuable financial intelligence on real estate without the lengthy process of securing a subpoena.
There is, however, no legal requirement that buyers obtain title insurance and financing to acquire U.S. real estate, therefore any individual able to make complete payment for their residences up front can avoid triggering the GTO.
Roughly one-quarter of U.S. residences purchased in 2015 and 2016 did not involve such financing, according to FinCEN.
The measure has nonetheless grabbed the attention of regulators outside the U.S.
In the U.K., where billions of dollars in suspicious funds have been used to acquire high-end residences in recent years, officials pitched plans last month to introduce their own version of the measure, a “tactical targeting order,” to gather intelligence from businesses and professions not normally required to establish anti-money laundering programs and report suspicious activity.
Contact Larissa Bernardes at firstname.lastname@example.org
|Topics :||Anti-money laundering , Counterterrorist Financing|
|Document Date:||August 14, 2019|