In yet another sign of its aggressive campaign to fight money laundering, the Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) has trained its sights on the high-end real estate market in New York and Miami. With the issuance of a little-known yet incredibly powerful anti-money laundering tool called a “Geographic Targeting Order” (“GTO”), FinCEN now requires title insurance companies to identify the natural persons behind companies used to pay all cash for luxury residential real properties located in the Borough of Manhattan and Miami- Dade County. According to a press release announcing the issuance of the GTOs, FinCEN is concerned that individuals are using all-cash purchases of real estate as a mechanism to carry out money laundering, and such individuals are using limited liability companies or other opaque structures to conceal their identities in such transactions. Under the terms of these GTOs, any title insurance company involved in an all-cash real estate transaction with a purchase price exceeding three million dollars in Manhattan, or exceeding one million dollars in Miami-Dade County, must report such a transaction to FinCEN and, in particular, identify the “beneficial owner” of the entity used to facilitate the purchase.

Background Regarding Geographic Targeting Orders -

A GTO is an administrative order issued by the director ofFinCEN requiring all domestic financial institutions or nonfinancial trades or businesses that exist within a geographic area to report on transactions any greater than a specified value. GTOs are authorized by the Bank Secrecy Act (“BSA”). Originally, GTOs were only permitted by law to last for 60 days, but that limitation was extended by the USA Patriot Act to 180 days. GTOs are typically not made public, and generally only those businesses served with a copy of a particular GTO are aware of its existence.