Disclosure requirements for all-cash purchases have been eased — slightly
By Rebecca San Juan
November 13, 2019
South Florida remains under the government microscope for all-cash transactions. But it — and other regions — are getting a break when it comes to purchases made by publicly traded companies.
The change came Friday when Financial Crimes Enforcement Network (FinCEN), a branch of the U.S. Treasury department, updated and renewed its transparency requirements for all-cash real estate transactions in South Florida.
Beginning in 2016, Treasury issued a “geographic targeting order” requiring title insurance companies to identify the person or people behind shell companies that pay cash for residential real estate above $300,000 in select metropolitan areas. FinCEN renews its GTO every six months.
Florida’s counties Miami-Dade, Broward and Palm Beach are the only ones in the state required to file such disclosures. Counties in eight other states are also on the list, including in Texas, New York, California, Hawaii, Nevada, Washington, Massachusetts and Chicago.
But at least one Miami Realtor says the change will hurt efforts to curb money laundering through real estate purchases.
“It’s good lobbying from publicly traded companies,” said Jeff Morr, chair of the Master Brokers Forum and partner with Rubin + Morr group at Douglas Elliman. “It defeats the purpose of the legislation. Investors can now launder money through publicly traded companies.”
Pushback from publicly traded companies led FinCEN to eliminate the requirement, said Andrew Ittleman, attorney and partner at Miami-based Fuerst Ittleman David & Joseph. But, Ittleman said, public company filings show who owns and manages the business and how it earns money.
“That information can be found elsewhere,” said Ittleman.
As for whether the legislation has curbed money laundering in real estate, Ittleman said, “It’s hard to say. Theoretically, this can still happen in the US” — but is less likely in metros covered by the GTO disclosure requirements.The GTO program began March 2016 as a way to stem money laundering. Federal agents looked to monitor transactions in cities with high concentrations of cash real estate purchases by foreigners, starting with Miami and Manhattan. The department ordered insurance companies to identify the true owners of shell companies that paid $1 million or more in cash for homes in Miami-Dade and $3 million or more for homes in Manhattan. The program limits later changed to require disclosure of purchases of $300,000 or more in South Florida.
The regulation has impacted real estate purchases in Miami-Dade. A 2018 study found a 95% drop in the amount of money spent by foreign companies on all-cash purchases. The decline began immediately after the rule took effect.
Looking forward, Ittleman said the GTO renewals will likely continue every six months until a permanent regulation is put in place. U.S. Senator Marco Rubio tried to take the policy national in 2018.
Said Ittleman, “Writing something into regulation is a difficult process. That’s the reason why FinCEN hasn’t done so yet.”
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