Starting on April 25, 2023, and ending on October 21, 2023, the U.S. Department of the Treasury Financial Crimes Enforcement Network (FinCEN) is requiring disclosure of beneficial ownership of entities that purchase residential real estate in transactions that are not financed i.e., cash purchases. A Geographical Targeting Order (GTO) assists FinCEN in tracking illicit funds and other criminal or illicit activity, according to the U.S. Treasury.
The GTO requires any title insurance company and its subsidiaries and agents to collect and report information about natural persons involved in certain residential real estate transactions, retain all records for five years, store the records in a manner accessible within a reasonable period of time, and make the records available to FinCEN or any other law enforcement or regulatory agency upon request. The GTO is implemented under the recordkeeping and reporting requirements of the Bank Secrecy Act and is intended to prevent money laundering.
The GTO applies to any individual who, directly or indirectly, owns 25% or more of the equity interests in the entity purchasing the residential real property. If the purchasing entity includes legal entities that are the owners of the purchasing entity, the information is required for each beneficial owner owning 25% or more of the equity interests of each legal entity in the ownership structure.
Entities covered by the GTO include a corporation, limited liability company, partnership, or other similar business entity whether formed in the U.S. or in any state or in a foreign jurisdiction. The GTO does not apply to trusts or companies that are listed on a security exchange regulated by the Securities Exchange Commission such as the NYSE, NASDAQ, or other self-regulatory organizations registered with the SEC.
Transactions covered by the GTO are limited to residential real properties purchased by entities in certain specified counties and boroughs in California, Colorado, Connecticut, Illinois, Florida, Hawaii, Massachusetts, Nevada, New York, Virginia, and Washington, with a purchase price of $300,000 or more, or a purchase price of $50,000 or more in the city or county of Baltimore, Maryland. If the transaction is financed by a lender, the GTO does not apply.
The required information includes “PII” (personal identifying information), including a legible copy of government issued identification (for example, a passport or driver’s license), the beneficial owner’s name, address, date of birth, occupation, and social security number or other individual taxpayer identification number. The purchasing entity is also required to provide its name, address, and taxpayer ID number or FEIN, if any.
In Nevada, the GTO applies in Clark County. In Colorado, the GTO applies in Adams, Arapahoe, Clear Creek, Denver, Douglas, Eagle, Elbert, El Paso, Fremont, Jefferson, Mesa, Pitkin, Pueblo, and Summit counties. Data will be required to be collected by the title companies, and within 30 days after the closing, a Currency Transaction Report is required to be completed and e-filed through the Bank Secrecy Act e-filing system. To electronically file a Currency Transaction Report, a covered business will need a BSA E-Filing User account. To create a BSA E-Filing User account, please visit https://bsaefiling.fincen.treas.gov/Enroll_Now.html For more information on E-Filing, please visit https://bsaefiling.fincen.treas.gov/ and review “About the BSA E-Filing System.
If you have any questions about this client advisory, please contact a member of our Real Estate group.