FinCEN Issues Revised Order Targeting Shell Companies Buying Real Estate

Aug 23, 2017   

August 23, 2017
By Keith Larsen

The Financial Crimes Enforcement Network has expanded its crackdown on real estate-related money laundering transactions involving wire transfers.

The agency has broadened its Geographic Targeting Orders (GTOs), which require U.S. title insurance companies to identify the people behind shell companies used to pay for high-end residential real estate in seven metropolitan areas, including Miami-Dade County.

This could have a big impact in Miami-Dade County where there is the largest supply of $1 million-plus condos in the region’s history.

The Financial Crimes Enforcement Network (FinCEN) also published
an advisory for financial institutions and the real estate industry on the money laundering risks associated with real estate transactions, including those involving luxury property purchased through shell companies, particularly when conducted without traditional financing.

Such transactions are vulnerable to abuse by criminals seeking to launder illegal proceeds and mask their identities, according to FinCEN.

“Through this advisory and other outreach to the private sector, FinCEN, industry, and law enforcement will be better positioned to protect the real

estate markets from serving as a vehicle to launder illicit proceeds,” said FinCEN acting director Jamal El-Hindi.

Andrew Ittleman, founder and partner at Miami law firm Fuerst Ittleman David & Joseph, PL, said the biggest difference with the recently revised orders is the focus on wire transfers and the fact that the GTO’s are now on Congress’s radar.

In January 2016, FinCEN originally issued GTOs to require U.S. title insurance companies to report beneficial ownership information on legal entities, including shell companies used to purchase certain luxury residential real estate in Manhattan and Miami – specifically. The order also applied to luxury residential property purchased by a shell company without a bank loan and made at least in part using a cashier’s check or similar instrument.

“Congress is looking at the GTO’s as being relevant in sanctions against Russia,” Ittleman said.

In July 2016 and February 2017, FinCEN reissued the original GTOs and extended coverage to all boroughs of New York City, Palm Beach County and Broward County, five counties in California (including Los Angeles, San Francisco and San Diego), and the Texas county that includes San Antonio.