U.S. regulators have given the nation’s all-cash luxury real-estate market a free pass for years, but that may be about to change. Now the fight against money laundering appears poised to put anonymous real-estate purchases in its cross-hairs.
It’s a common story—ultra-wealthy individuals use shell companies to make huge all-cash real-estates purchases outside the glare of BSA/AML regulations—especially in real-estate hotspots like London, Vancouver, New York, and Miami.
But FinCEN announced last week that it will now take aim “at real-estate secrecy in New York and Miami” with ‘geographic targeting orders’ (GTOs) that “require identification for high-end cash buyers.”
FinCEN will press this effort by requiring some U.S. title insurance companies to identify the actual individuals—i.e. the true beneficial owners—behind the shell companies that make all-cash purchases of luxury real-estate.
FinCEN asserts that it “is concerned that all-cash purchases – i.e., those without bank financing – may be conducted by individuals attempting to hide their assets and identity by purchasing residential properties through limited liability companies or other opaque structures.”
“We are seeking to understand the risk that corrupt foreign officials, or transnational criminals, may be using premium U.S. real estate to secretly invest millions in dirty money,” said FinCEN Director Jennifer Shasky Calvery. “Over the years, our rules have evolved to make the standard mortgage market more transparent and less hospitable to fraud and money laundering. But cash purchases present a more complex gap that we seek to address. These GTOs will produce valuable data that will assist law enforcement and inform our broader efforts to combat money laundering in the real estate sector.”
FinCEN notes that this move aligns with it risk-based approach to combating money laundering. The GTOs will take effect March 1, 2016, and they will expire after 180 days.
To learn more about how to implement a true risk-based approach at your institution, contact us here at AML Partners. Our experts can help you plan a true risk-based approach, and we offer an end-to-end BSA/AML software ecosystem that supports your customized risk-based approach.