On April 21, 2023, the Financial Crimes Enforcement Network (FinCEN) reissued its Geographic Targeting Orders (GTOs) to expand its designated United States metropolitan areas. Renewing the GTOs allows FinCEN to continue assisting law enforcement by tracking illicit funds laundered through real estate.
FinCEN reissues real estate Geographic Targeting Orders
April 24, 2023
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Key Takeaways
- FinCEN reissued Geographic Targeting Orders to include two new regions in Colorado and Connecticut.
- Real estate purchases of $300,000 or more (or $50,000 or more in the City and County of Baltimore) are affected by the GTO because they have historically been a successful vehicle for money laundering.
- Real estate lending BSA training should include GTO guidance, specifically on identifying red flags at loan origination, to ensure the detection of these transactions.
Expanded efforts
FinCEN GTO extended to combat real estate money laundering
GTO overview
What are Geographic Targeting Orders?
Geographic Targeting Orders are authorized under the Bank Secrecy Act (BSA). They provide valuable data on the purchase of residential real estate that helps detect money laundering and other illicit activity through the purchase of real estate. The GTOs require U.S. title insurance companies to identify the natural persons or beneficial owners behind shell companies used in non-financed purchases of real estate.
Real estate purchases have been a successful vehicle for laundering money for many years, particularly through the shell companies that this GTO aims to negate. At the end of 2021, the Biden administration announced that they would pay closer attention to corruption in the real estate market, with a special focus on all-cash commercial and residential real estate transactions.
Residential real estate transactions covered by the GTOs include transactions made with cashier’s checks, certified checks, traveler’s checks, personal checks, business checks, money orders, funds transfers, or virtual currency. The purchase amount threshold remains $300,000 for each covered metropolitan area, with the exception of the City and County of Baltimore, where the purchase threshold is $50,000. The original $300,000 threshold was set in 2018 when it was determined that money laundering is widespread within all residential real estate, not only on higher-end, expensive properties.
New York City and Miami were the original targets under the first order in 2016. Subsequent orders expanded the metropolitan watch areas, and this latest order includes Litchfield County in Connecticut and Adams, Arapahoe, Clear Creek, Denver, Douglas, Eagle, Elbert, El Paso, Fremont, Jefferson, Mesa, Pitkin, Pueblo, and Summit counties in Colorado.
- Boston
- Chicago
- Dallas-Fort Worth
- Houston
- Laredo
- Honolulu, Maui, Hawaii, and Kauai
- Las Vegas
- Los Angeles
- Miami
- New York City
- San Antonio
- San Diego
- San Francisco
- Seattle
- District of Columbia
- Northern Virginia
- Maryland (DMV)
- City and county of Baltimore
- County of Fairfield, Connecticut
The effective period of the GTOs for purchases in the newly added areas begins on May 24, 2023.
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What does the FinCEN GTO mean for your financial institution?
- Financial institutions should have procedures in place to detect these transactions.
While title insurance companies are required to collect and report data on covered transactions, regulators expect financial institutions to have procedures in place to detect these transactions. Additionally, they should include reasonable due diligence to determine whether the activity would require suspicious activity reporting. - Pay attention to red flags for suspicious activity related to real estate purchases.
Money laundering red flags include cash payments or cash payoffs on loans, early payoffs, and large wire transfers for loan payments. A good AML software monitoring system will automatically alert the BSA department to this type of activity, but frontline staff can help by staying vigilant. - Real estate lending BSA training should include the GTOs guidance.
BSA training should specifically include how to identify red flags at real estate loan origination. With the new customer due diligence rule, beneficial ownership knowledge should be throughout all lines of business, and enhanced training on “why” collecting beneficial ownership information is critical. It will equip lenders with the knowledge they need to know to detect and report illicit activity.
FinCEN issued guidance in 2017 for GTO responsibilities for financial institutions, and this guidance is still applicable today (FIN-2017-A003). FinCEN also issued FAQs, which you may find useful.
