Purchasing real estate anonymously through a shell company has been a popular method of money laundering, especially in high-end housing markets. To combat the problem, the federal Financial Crimes Enforcement Network (FinCEN) has imposed data collection and reporting requirements on title insurance companies involved in certain transactions in targeted geographic areas, including Miami-Dade, Broward and Palm Beach counties. These rules were recently amended and extended through April 22, 2022.
FinCEN’s geographic targeting orders (GTOs) require title companies to identify the natural persons behind legal entities engaged in all-cash purchases of residential real estate at or above certain price levels. While the original minimum price point for the targeted Florida counties was $1 million, it has since been lowered to $300,000. That means most real estate sales in those counties are now FinCEN-covered transactions.
A covered transaction is a purchase made without a bank loan and at least or in part by using currency or a cashier’s check, certified check, traveler’s check, personal check, business check, money order or wire transfer of funds. The buyer must be a corporation, limited liability company (LLC), partnership or other similar business entity, regardless of where it was formed or incorporated. The residential real property must be located in the counties covered by the GTO.
Under a GTO, a title company and its subsidiary and/or agent must report the names of all natural persons holding a 25 percent or greater ownership interest of residential real estate in a covered transaction. The title company must obtain copies of those owners’ driver’s licenses, passports or other identifying documents. If the purchaser is an LLC, the title company must provide the names, addresses and tax identification numbers of every individual with an ownership stake in the LLC.
Violators are subject to civil and criminal penalties for conduct ranging from negligence to willful violations. Criminal punishment can include fines of up to $500,000 and a prison term of up to 10 years. Civil penalties can range from $500 to $100,000.
Title companies must make the required report within 30 days after the residential real estate closing. So despite the wide range of the GTOs and the potential penalties for violations, the transaction itself may not be interrupted. Nevertheless, a federal investigation might lead to enforcement measures, so it is important to be aware of this possibility no matter which side of the deal you’re on.
Based in Miami, Norma Echarte & Associates represents buyers and sellers in real estate transactions clients throughout South Florida, including Fort Lauderdale, West Palm Beach and Boca Raton. Please call 305-501-2844 or contact us online to schedule a meeting.