AML Compliance in U.S. cash real-estate buys still limited to six-month GTOs

FinCEN renews six-month GTOs, a limited tool for AML Compliance for real-estate cash purchases

All-cash purchases of high-value real estate have long been a haven of money launderers. But FinCEN announced in late October that it would renew existing geographic targeting orders but that it would expand them. For another six months.

FinCEN’s GTOs, which first appeared in 2016, require U.S. title insurance companies to identify the natural persons behind shell companies used in non-financed purchases (i.e. all cash) of residential real estate. The terms of the GTOs are effective beginning October 27, 2022, and ending on April 24, 2023.

Pushback from various sectors connected to the real-estate industry has long held off full and permanent AML Compliance in real estate, but the magnitude of the money laundering and AML Compliance failures in real estate purchases has been a topic for years. And it’s been a major problem around the world–in cities like London, Vancouver, Miami, and well beyond. The GTOs in the U.S. have always had six-month expiration dates, but FinCEN has managed to renew them since their introduction. However, each GTO renewal must specify the included geographic locations rather than being applicable to all of the U.S.

Talk of bringing real-estate transactions fully under AML Compliance requirements has been circulating for more than two decades. But in the U.S., politicians have so far excepted the real-estate industry from permanent AML Compliance regulations. However, pressure has been growing in the U.S. and the U.K. to stop being first-choice havens for the dirty money of kleptocrats, oligarchs, and others whose sources of funds cannot be traced to licit activity.

Not surprisingly, FinCEN asserts that the GTOs continue to provide valuable data on the purchase of residential real estate by persons possibly involved in various illicit enterprises. Renewing the GTOs 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. But the GTOs remain oft-renewed six-month stop gaps in limited locations.

In the most recent action, FinCEN renewed the GTOs that cover certain counties within the following major U.S. metropolitan areas:  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, and Maryland (DMV) area; as well as the City and County of Baltimore, the County of Fairfield, Connecticut, and the Hawaiian islands of Honolulu, Maui, Hawaii, and Kauai.

FinCEN, working in conjunction with law enforcement partners, identified additional regions that present greater risks for illicit finance activity through non-financed purchases of residential real estate.  Accordingly, today, FinCEN expanded the geographic coverage of the GTOs to counties encompassing the Texas cities of Houston and Laredo.  The effective period of the GTOs for purchases in these newly added areas begins on November 25, 2022.  The purchase amount threshold remains $300,000 for each covered metropolitan area, with the exception of the City and County of Baltimore, where the purchase threshold is $50,000.


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