On January 13, 2016, the Financial Crimes Enforcement Network (“FinCEN”) issued Geographic Targeting Orders (“GTOs”) that temporarily require certain US title insurance companies to identify the natural persons behind companies used in “all cash” deals for high end residential real estate in Manhattan and MiamiDade County, Florida. FinCEN was concerned that shell companies could be used in allcash transactions for money-laundering purposes. This release came a few weeks before the release of “Anonymous, Inc.,” a 60 Minutes news report that exposed certain lawyers, through the use of hidden cameras, who were inclined to assist prospective clients to move questionable funds into the US as well as other news articles expressing concern on this topic. The GTOs apply to “Covered Businesses” and to “Covered Transactions.” A Covered Business is a title insurance company and any of its subsidiaries and agents. A Covered Transaction means a transaction in which a legal entity purchases residential real property located in Manhattan, New York Miami-Dade County, Florida, for a purchase price of more than $3 million or $1 million, respectively, in an all cash deal (i.e., without bank financing), and, such purchase is made, at least in part, using currency or a cashier’s check, a certified check, a traveler’s check, or a money order in any form (“Covered Currencies”). If a Covered Business is involved in a Covered Transaction, then the Covered Business is required to collect, identify, and/or report information regarding or concerning:
- The individual primarily responsible representing
- the purchaser;
- The Beneficial Owners;
- All members of a limited liability company; and
- The transaction including date of closing, total amount transferred Covered Currencies, and the total purchase price.
For these purposes, Beneficial Owner is defined as each individual who, directly or indirectly, owns 25% or more of the equity interests of the purchaser. The individuals
required to be identified in items 1 and 2 above would have to provide a copy of this individual’s driver’s license, passport, or other similar identifying documentation. Members of a limited liability company would have to provide their name, address, and taxpayer identification numbers. The GTOs will be in effect for 180 days beginning on March 1, 2016 and expiring on
August 27, 2016. Of particular note, the GTO would not apply to
- (i) any acquisition outside the 180-day window above,
- (ii) acquisitions that use bank financing;
- (iii) acquisitions that do not use Covered Currencies such as wire transfers,
- (iv) acquisitions outside of Manhattan (such as Brooklyn) or Miami-Dade County,
- (v) acquisitions below the reportable threshold,
- (vi) acquisitions that do not use title insurance, and
- (vii) acquisitions of commercial property.