FinCEN Renews and Expands GTO
October 24, 2023
The Financial Crimes Enforcement Network (FinCEN) on Oct. 20 renewed and once again expanded its Geographic Targeting Ordes (GTO) that requires U.S. title insurance companies to identify the natural persons behind shell companies used in non-financed purchases of residential real estate.
The terms of the GTO are effective through April 18, 2024.
FinCEN, working in conjunction with our law enforcement partners, identified additional regions that present greater risks for illicit finance activity through non-financed purchases of residential real estate.
The expanded geographic coverage of the GTO now includes the counties of Bristol, Essex, Norfolk and Plymouth in Massachusetts; the counties of Hillsborough, Pasco, Pinellas, Manatee, Sarasota, Charlotte, Lee and Collier in Florida; and the county of Travis in Texas.
The renewed GTO continues to include the following counties and metropolitan areas:
- Dallas-Fort Worth
- Las Vegas
- Los Angeles
- New York City
- San Antonio
- San Diego
- San Francisco
- Washington, D.C.
- Northern Virginia and Maryland (DMV) area
- City and County of Baltimore
- County of Fairfield, Conn.
- Hawaiian Islands of Honolulu, Maui, Hawaii and Kauai
- Houston and Laredo, Texas
- Litchfield County, Conn.
- Adams, Arapahoe, Clear Creek, Denver, Douglas, Eagle, Elbert, El Paso, Fremont, Jefferson, Mesa, Pitkin, Pueblo, and Summit counties in Colorado
The purchase amount threshold remains $300,000 for each covered metropolitan area, except for the city and county of Baltimore, where the purchase threshold is $50,000.
FinCEN appreciates the continued assistance and cooperation of title insurance companies and the American Land Title Association in protecting real estate markets from abuse by illicit actors.
According to FinCEN, the GTOs continue to provide valuable data on the purchase of residential real estate by persons possibly involved in various illicit enterprises. Renewing the GTO will further assist in tracking illicit funds and other criminal or illicit activity, as well as inform FinCEN’s future regulatory efforts in this sector, according to FinCEN.
Earlier this month, FinCEN Director Andrea Gacki said the U.S. real estate market has been susceptible to manipulation and used as a haven to launder money.
“Our real estate market is a relatively stable store of value, and it can be opaque, and there are gaps in industry regulation,” she said. “Increasing transparency in the real estate sector will assist with curbing the ability of corrupt officials and criminals to launder the proceeds of their illicit activity or ill-gotten gains as well as strengthen U.S. national security and help protect the integrity of the U.S. financial system. For that reason, Treasury is committed to developing a solution to increase the transparency in the domestic real estate market.”
In December 2021, FinCEN issued an Advance Notice of Proposed Rulemaking to solicit public comment on a potential rule to address the vulnerability in the U.S. real estate market to money laundering and other illicit activity.
“We considered how best to address the potential for money laundering created by real estate transactions in the commercial and residential sectors,” Gacki said. “These types of transactions—often conducted through opaque shell companies—are effective vehicles for laundering illicit funds.”
According to Gacki, the Treasury plans to issue a Notice of Proposed Rulemaking later this year to address the vulnerability in the U.S. real estate market to money laundering and other illicit activity.
Last year, ALTA submitted a letter recommending FinCEN develop 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. ALTA also said FinCEN should finalize regulations for the development of a beneficial ownership database required under the Corporate Transparency Act (CTA) before taking further actions that would add additional burdens to the title insurance industry.
“The collection of beneficial ownership data under the CTA should reduce (if not eliminate) the need for real estate and title professionals to collect and report this duplicative information,” ALTA wrote. “Instead, reporting companies should be able to rely on information already collected under the CTA and only require reporting of beneficial owner data when it is not otherwise collected under the CTA.”
Additionally, given the data coverage of many title data providers, it is possible that FinCEN could develop more targeted real estate programs given those commercial options.
“The burden is currently falling on small businesses and title insurers to gather information and function as ‘private investigators,’” according to ALTA. “Once implemented, the CTA should ensure that most law enforcement asset tracing is possible using those commercial sources. This would make it possible for a real estate rule to focus on specific coverage gaps. A narrower set of real estate specific data would be less costly and time consuming to collect and provide.”
FinCEN began issuing Geographic Targeting (GTOs) orders in January 2016 requiring title insurance companies to file reports and maintain records concerning all-cash purchases of residential real estate above a certain threshold in select metropolitan areas of the United States.
Any questions about the orders should be directed to FinCEN’s Regulatory Support Section at FRC@FinCEN.gov.
Contact ALTA at 202-296-3671 or email@example.com.