Geographic Targeting Orders reissued for 12 metropolitan areas
AML AND COMPLIANCE NEWS |
The Financial Crimes Enforcement Network (FinCEN) announced the renewal of its Geographic Targeting Orders (GTOs).
On April 29, 2021, the Financial Crimes Enforcement Network (FinCEN) announced the renewal of its Geographic Targeting Orders (GTOs) that require U.S. title insurance companies to identify the natural persons behind shell companies used in all-cash purchases of residential real estate. GTOs are orders issued by FinCEN to enforce additional record-keeping and reporting requirements for transactions over a certain value for any United States domestic financial institution within a geographic area. The reissued GTOs are identical to the November 2020 GTOs, and cover the following major U.S. metropolitan areas:
- Dallas-Fort Worth
- Las Vegas
- Los Angeles
- New York City
- San Antonio
- San Diego
- San Francisco
The purchase price threshold remains $300,000 for each covered metropolitan area. The terms of the GTO are effective beginning May 5, 2021, and end Oct. 31, 2021.
Important things to note from the GTO
The GTO applies to a covered business involved with covered transactions. A covered business refers to a title insurance company and any of its subsidiaries and agents. A covered transaction refers to any transaction in which:
- Residential real property is purchased by a legal entity (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).
- The purchase price of the residential real property is $300,000 or more in any of the metropolitan areas stated above.
- Such purchase is made without a bank loan or other similar form of external financing.
- Such 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.
As stated in the copy of the GTO, the covered business must:
- Retain all records relating to compliance with this order for five years from the last day that this order is effective (including any renewals of this order)
- Store such records in a manner accessible within a reasonable period of time
- Make such records available to FinCEN, or any other appropriate law enforcement or regulatory agency, upon request
Currency transaction report requirements from the order
Currency transaction reports (CTRs) are directly affected by the GTOs. A CTR must be reported to FinCEN for any covered business involved in a covered transaction. This must be done within 30 days of the closing of the covered transaction.
Regarding Part I of the CTR, a covered business must:
- Include information about the identity of the individual responsible for representing the legal entity by selecting Field 2 box b (Person conducting transaction for another). The covered business must obtain and record a copy of this individual’s identification.
- Include information about the identity of the legal entity by selecting Field 2, box c (Person on whose behalf the transaction was conducted), and also select the “If entity” check box.
- Include information about the identity of the beneficial owner(s) of the legal entity by selecting Field 2, box c. The covered business must obtain and record a copy of the beneficial owner’s identifying documentation.
Regarding Part II of the CTR, information about the covered transaction must include the following:
- Date of closing of the covered transaction should be included in Field 23.
- Total purchase price of the covered transaction and the method of payment should be included in Field 25.z(leave Fields 25 a–i blank).
Regarding Part III of the CTR, the following information should be included in the fields mentioned:
- A covered business should select the plus (+) to report multiple property addresses if the covered transaction involves the purchase of multiple properties.
- The address of real property involved in the covered transaction should be included in Fields 33-37.
- Total purchase price of the real property listed in Fields 33-37 should be included in Field 41. This should reflect the same purchase price as Field 25.z, except where multiple properties are purchased in the same covered transaction. When reporting a purchase of multiple properties in the same covered transaction, report the total purchase price in Part II, Field 25.z, and price per property in Field 41 for each property.
Regarding Part IV of the CTR, the covered business shall ensure the term REGTO0521 remains in Field 45.
For reference, download the CTR template.
Importance of compliance with GTOs
GTOs are defined in the Bank Secrecy Act in 31 U.S.C. section 5326(a). There is valuable data that come from GTOs on residential real estate purchases by individuals potentially involved in illegal enterprises. Renewing the GTOs helps assist in tracking illicit funds and other criminal activity. In addition, complying with GTOs will prevent penalties for noncompliance. The covered business, and any of its officers, directors, employees and agents, may be liable for civil or criminal penalties for violating any of the terms of the order. According to the U.S. Government Publishing Office, “FinCEN estimates the total hourly burden of reporting and recordkeeping for each reportable transaction under a GTO is 25 minutes.”
For further details about the renewal of the Geographic Targeting Orders, read the copy of the GTO here.
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