FinCEN crackdown on real estate money laundering expected this month | SkipLeadPro

By Ashraful Islam Updated August 12, 2023 Reviewed by Ashraful Islam
Photo Credit: BiggerPockets
Photo: HousingWire

After years of discussion, the U.S. Treasury Department is expected to propose a rule that would effectively end anonymous luxury home purchases in the coming weeks, according to the Financial Crimes Enforcement Network’s (FinCEN) regulatory agenda.

The rule, which department officials first said they planned to implement in 2021, would require real estate professionals, such as title insurers, to report the identities of beneficial owners buying real estate in cash to FinCEN. The department believes the proposed rule will close a loophole that allows corrupt oligarchs, terrorists and criminals to hide illegally obtained funds in U.S. real estate.

According to a state from Treasury Secretary Janet Yellen in March, as much as $2.3 billion was laundered through U.S. real estate between 2015 and 2020, a trend that she said has been going on for decades.

The new rule would replace FinCEN’s current reporting system known as the Geographic Targeting Orders (GTOs).

The GTOs require title companies to identify the people behind shell companies used in all-cash purchases of residential real estate.

As of mid-August 2023, 34 cities and counties throughout the U.S., including Litchfield and Fairfield Counties in Connecticut; Adams, Arapahoe, Clear Creek, Denver, Douglas, Eagle, Elbert, El Paso, Fremont, Jefferson, Mesa, Pitkin, Pueblo, and Summit counties in Colorado; Boston; Chicago; Dallas-Fort Worth; Las Vegas; Los Angeles; Miami; New York City; San Antonio; San Diego; San Francisco; Seattle; Washington, D.C.; Northern Virginia and Maryland (DMV) area; the city and county of Baltimore; the Hawaiian Islands of Honolulu, Maui, Hawaii and Kauai; and Houston and Laredo, Texas.

In all of these GTOs, except for the city and county of Baltimore, which has a threshold of $50,000, all cash purchases of $300,000 or more must reported to FinCEN.

Officials have also been working on implanting a related rule that would force real estate professionals to report the identities of shell company owners who purchase real estate in cash through their shell company. While the American Land Title Association has expressed support of the new rule, it has also stated that its implementation should be delayed until the shell company rule is also complete.

The proposed rule will be open to public and industry feedback once it is announced

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