Under the GTOs, US title insurance companies are required to collect and report information about the persons involved in certain residential real estate transactions. The novelty is that the geographic coverage of the GTOs now also includes the counties encompassing the Texas cities of Houston and Laredo, which were not previously on the list. The threshold relating to the real estate purchase price did not change from the previous period and it remains USD 300,000 for each listed county, except for the City and County of Baltimore, where the applicable threshold is USD 50,000.
Summary of the FinCEN Renewed and Expanded Real Estate Geographic Targeting Orders
Covered Business, Covered Transaction. Under the Geographic Targeting Order, the US title insurance companies are obliged to collect and report information about the persons involved in certain “Covered Transactions.” A “Covered Transaction” is defined as a transaction in which: (i) residential real property is purchased by a legal entity; (ii) the purchase price of the residential real property is in the amount of USD 50,000 or more (in the City or County of Baltimore in Maryland), or in the amount of USD 300,000 or more (in Boston; Chicago; Dallas-Fort Worth; Las Vegas; Los Angeles; Miami; New York City; San Antonio; San Diego; San Francisco; Seattle, the District of Columbia, Northern Virginia; the County of Fairfield, Connecticut, and the Hawaiian islands of Honolulu, Maui, Hawaii, and Kauai); (iii) purchase is made without a bank loan or other similar form of external financing; and (iv) the purchase is made, at least in part, using currency or a cashier’s check, a certified check, a traveler’s check, a personal check, a business check, a money order in any form, a funds transfer, or virtual currency.
Scope of Reporting Obligation. The US title insurance companies are obliged to report the Covered Transactions by filing a FinCEN Currency Transaction Report, within 30 days of the closing of the Covered Transaction, through the Bank Secrecy Act (BSA) E-Filing system. Information that needs to be reported includes the identity of the individual primarily responsible for representing the legal entity, information about the identity of the legal entity, and information about the identity of the beneficial owners. The US title insurance company must obtain and record a copy the driver's license, passport, or other similar identifying documentation. Further, the address of real property, the date of closing and the total purchase price of the real property, together with the method of payment, are the essential elements that need to be reported.
Definition of Beneficial Owner and Legal Entity. Under the Geographic Targeting Order (GTO), the Beneficial Owner means an individual who, directly or indirectly, owns 25% or more of the equity interests of the Legal Entity purchasing real property in the Covered Transaction. The Legal Entity means a corporation, limited liability company, partnership or other similar business entity, whether formed under the laws of a state, or of the United States, or a foreign jurisdiction, other than a business whose common stock or analogous equity interests are listed on a securities exchange regulated by the Securities Exchange Commission (SEC) or a self-regulatory organization registered with the SEC, or an entity solely owned by such a business.
Definition of Residential Real Property. Although the GTO does not stipulate the definition of residential real property, the Frequently Asked Questions document clarifies that the definition means real property (including individual units of condominiums and cooperatives) designed principally for the occupancy of from one to four families.
Exceptions to Reporting Obligations. The US title insurance companies are obliged to take reasonable steps to determine whether any part of the purchase price was made using the specified method of payment. There are no de minimis exceptions regarding the methods of payment.
Reporting Deadline. The US title insurance companies are obliged to file a FinCEN Currency Transaction Report within 30 days of the closing of the transaction.
Retention of Records. The US title insurance companies are obliged to retain all records relating to compliance with the GTO for a period of five years from the last day that the GTO is effective (including any renewals of the GTO), and make those records available to FinCEN upon request.
Potential Penalties for Noncompliance. The US title insurance companies, and any of their officers, directors, employees, and agents, may be liable for civil or criminal penalties for violating any of the terms of the GTO.
FinCEN renewed its GTOs requiring US title insurance companies to identify the individuals behind shell companies used in various non-financed residential real estate purchases. Reporting applies to properties with a purchase price of USD 300,000 or more in certain counties enlisted in the GTO. The transaction is reportable if the purchase is made by a legal entity, without a bank loan or similar external financing, and using (at least in part) currency or a cashier’s check, a certified check, a traveler’s check, a personal check, a business check, a money order, a funds transfer, or virtual currency. The reporting needs to be done within 30 days of closing by the US title insurance company.