EFFECTIVE NOVEMBER 17, 2018
This Order now covers all residential sales with a sale price of $300,000 or more in San Francisco, San Mateo, Santa Clara, Los Angeles and San Diego Counties.
BACKGROUND: On July 22, 2016, the Financial Crimes Enforcement Network (“FinCEN”), an agency of the United States Treasury Department, issued a Geographic Targeting Order (“GTO”) directing Title Insurers and their agents to collect and report information about certain residential real estate transactions where the purchase price was $2,000,000 or more. The purpose of that Geographic Targeting Order was to assist law enforcement and regulatory agencies in identifying potential money-laundering operations. That Order expired by its own terms earlier this year.
NEW: It has now been announced that effective November 17, 2018 the GTO has been reinstated but it has also been greatly expanded in its scope and coverage. The GTO now covers all residential transaction of $300,000 or more in San Francisco, San Mateo, Santa Clara, Los Angeles and San Diego Counties. The Order now also covers payments with virtual currencies.
The FinCEN Order applies to transactions that meet all four (4) of the following criteria:
- The Property is residential, not commercial, property; and
- The Purchaser is a corporation, limited liability company, partnership or other legal or business entity, as opposed to people buying in their own name or in the name of their trust; and
- The purchase is made without a bank loan or without using a similar form of institutional financing that is required to have an anti-money laundering policy; and
- The purchase is made, at least in part, using any form of currency or a cashier’s check, a certified check, a traveler’s check, a personal check, a business check, virtual currency or a money order in any form, or a funds transfer. Thus, if the other three (3) factors exist, payment of at least part of the purchase price using one of these methods triggers the obligation to complete the Title Company form.
For transactions meeting all four (4) of the foregoing criteria, Title Companies are required to report to FinCEN within 30 days prior to the Close of Escrow some of the Buyer’s non-public personal information. This procedure is designed to identify the individuals behind the legal entity that is being used to purchase the Property. If this information is not provided by the representative of the purchasing entity prior to COE, FinCEN has instructed Title Companies not to close the transaction.
For more information go to:
The Announcement with FAQ’s
https://www.fincen.gov/news/news-releases/fincen-reissues-real-estate-geographic-targeting-orders-and-expands-coverage-12
The Order;
https://www.fincen.gov/sites/default/files/shared/Real%20Estate%20GTO%20GENERIC_111518_FINAL.pdf
PRACTICE TIP FOR AGENTS:
Regardless of which principal you represent, if you are already involved in a sale transaction that you believe meets all four (4) of the criteria listed above, then:
- Provide your principal with the revised GTO Advisory; and,
- Immediately check with the Title Company regarding whether they will be requiring the buyer to provide the FinCEN necessary information.
The failure of a Buyer in a transaction covered by this GTO to timely provide required information to the Title Company may result in a delay in the closing of the transaction. As a Listing Agent, if a Buyer presents an Offer which causes you to believe that all four (4) criteria above have been met, then urge the Seller to issue a Counter Offer specifying a time frame within which Buyer must comply with the new reporting requirements to avoid any delay in the Close of Escrow. Suggested sample language to achieve this is as follows:
“The person signing in a Representative Capacity for the Buyer shall complete and return to the Title/Escrow Company any and all information required to comply with the FinCEN Geographic Targeting Order within ________ [insert number] Days of receipt of Title/Escrow Company’s request for that information and shall cooperate with Title/Escrow Company so as to not cause any delay in the Close of Escrow.”
Note: Check with the Title Company for the number of Days to insert in the above blank so as to meet their requirements to comply with this GTO.
DO NOT FORWARD TO CLIENTS. This Broker Alert is for the exclusive use of clients of Broker Risk Management and their agents. It may not be reproduced or distributed without the express written consent of Broker Risk Management. The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry, but rather are intended to suggest good risk management practices.
© Copyright 2018 Broker Risk Management 11/16/2018