FinCEN Continues Patriot Act Expansion Amid Real-Estate Order

Jan 13, 2016   

By Samuel Rubenfeld
January 13, 2016

The U.S. Department of Treasury’s order targeting high-end real estate buyers in Manhattan and Miami comes amid the department’s recent expansion of its authority under the Patriot Act, experts said.

Treasury’s Financial Crimes Enforcement Network, or FinCEN, on Wednesday issued a six-month geographic targeting order requiring title insurance companies to identify the real people behind companies used to make all-cash transactions involving high-end real estate in Miami and the borough of Manhattan. FinCEN said it’s moving forward with its risk-based approach to fighting money laundering in the real-estate sector, and title insurance “is a common feature in the vast majority” of real-estate transactions.

“Title insurance companies thus play a central role that can provide FinCEN with valuable information about real estate transactions of concern,” said FinCEN.

The order follows years of reporting in multiple cities, including New York and Miami, on the secrecy of real-estate transactions. A series by the New York Times NYT -3.04%explored secrecy in the Time Warner Center towers, while The Nation magazine and the Miami Herald looked at shell companies buying up real estate in Miami, including a Herald report this week on a $47 million mansion deal. (Risk & Compliance Journal has done some reporting on shell-company real-estate deals in Manhattan as well.)

Experts told Risk & Compliance Journal, though, that the order comes amid a pattern of FinCEN expanding the reach of the Patriot Act.

“This is consistent with its search for suspicious activity when trying to identify and close-off loopholes where criminals were trying to evade the banking system,” said Josh Hanna, a principal at Deloitte LLP.

FinCEN, in the past month, has imposed penalties for the first time on a card club and on a precious-metals dealer. Andrew Ittleman, a Miami-based partner at law firm Fuerst Ittleman David & Joseph, PL, said it comes as FinCEN expands the definition of what counts as a “financial institution” under its mandate.

“Over time, that term has expanded to include car dealers, diamond dealers and other companies engaged in high-value sales. Now it’s time for real estate,” he said.

Mr. Ittleman also noted that this FinCEN geographic order is the third in less than a year targeting Miami, pointing to the agency’s push against electronic exporters and check-cashers.

“Miami, for whatever reason, has been labeled as having an enhanced risk of fraud. That has clearly reached the eyes of FinCEN; they’re focusing on us,” he said.

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