September 1, 2017
Advantage Title: Industry Bulletin 2017-04
New Geographic Targeting Order-
Effective September 22, 2017
On August 22, 2017, the Director of the United States Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) issued a new Geographic Targeting Order (“New GTO”) requiring U.S. title insurance companies “to collect and report information about the persons involved in certain real estate transactions.” A copy of the final form of the New GTO that was sent to all title insurance companies can be found here.
WHAT CHANGED FROM THE CURRENT GTO?
There are two significant revisions contained in the New GTO.
- Payments made via wire transfer are covered and reportable.
- The City and County of Honolulu in Hawaii have been added as covered jurisdictions.
WHAT IS THE EFFECTIVE DATE OF THE ADDITIONAL GTO?
The New GTO, relative to all Covered Transactions (defined below) takes effect on September 22, 2017, and will remain in effect, unless otherwise extended by FinCEN, through March 20, 2018. FinCEN has indicated that they will be requesting authority to make the reporting requirements of the GTO permanent. Advantage Title Agency, Inc. (“Advantage”) will provide any updates upon such an event.
PLEASE NOTE: The current GTO expired on August 22, 2017. As a result, transactions closing between August 23rd and September 21st will not be subject to any reporting requirements.
WHO IS BOUND BY THE ADDITIONAL GTO?
A Covered Business is defined by the New GTO as the title companies that were recipients of the New GTO and any of their subsidiaries and agents. As a title agent of those title underwriters, Advantage is bound by the New GTO.
WHAT TRANSACTIONS ARE SUBJECT TO THE ADDITIONAL GTO?
The New GTO applies to a “Covered Transaction” as defined in the New GTO. A Covered Transaction means any real estate transaction that meets all of the following criteria:
- Purchase of real property located in the Boroughs of Manhattan, Bronx, Brooklyn, Queens and Staten Island, in the City of New York. In addition, as to real property outside of New York State, the New GTO covers Miami-Dade, Broward and Palm Beach Counties in Florida, Bexar County in Texas, Los Angeles, San Diego, San Francisco, San Mateo and Santa Clara Counties in California and the City and County of Honolulu in Hawaii.
- The real property is residential real property, including an individual condominium or cooperative unit designed principally for the occupancy of one-to-four families. If there is a mixed-use component to the real property (e.g. storefront on the first floor with 3 apartments above the first floor), the real property will likely be considered residential real property.
- The total purchase price is one of the following:
Please note, in the event the Purchaser pays the New York State Real Estate Transfer Tax and/or the New York City Real Property Transfer Tax, the “recursive consideration” a/k/a “bulk up” will be applied towards the purchase price.
- $3,000,000.00 or more in the Borough of Manhattan;
- $1,500,000.00 or more in the Borough of Bronx, Brooklyn, Queens or Staten Island;
- $1,000,000 or more in Miami-Dade, Broward or Palm Beach County;
- $500,000.00 or more in Bexar County;
- $2,000,000.00 or more in Los Angeles, San Diego, San Francisco, San Mateo or Santa Clara County;
- $3,000,000.00 or more in the City and County of Honolulu.
- The Purchaser is a Legal Entity which is defined under the New GTO as a corporation, limited liability company, partnership or other similar business entity whether formed under the laws of New York, any other state, the United States or a foreign jurisdiction. The definition of legal entity does not include natural persons or trusts.
- The purchase is made without a bank loan or similar form of external financing from a financial institution. The reporting exclusion is only triggered by loans financed by a financial institution. If financing is provided by a private lender, seller or other business, the transaction is reportable to the extent all other requirements are met for a Covered Transaction.
- The Purchaser pays any portion of the purchase price using currency (i.e. cash), cashier's check, certified check, traveler's check, a personal check, a business check, money order or wire transfer (collectively, “Monetary Instrument”). There is no de minimis exception regarding the methods of payment. The triggering of this aspect of the reporting requirement includes any partial payment of the purchase price representing a contract deposit or down payment on contract.
The New GTO reporting requirement is only triggered when the purchase of the real property is funded through a Monetary Instrument. The New GTO does not cover the form of payment of a settlement service.
HOW WILL ADVANTAGE COMPLY WITH THE ADDITIONAL GTO?
When insuring a Covered Transaction, Advantage must receive information sufficient to enable Advantage to complete IRS/FinCEN Form 8300. This will entail completion and execution of the ALTA GTO Information Collection Form by the Purchaser or their counsel.
WHAT INFORMATION IS NECESSARY TO COMPLETE IRS/FinCEN FORM 8300?
- Identity of the individual primarily responsible for representing the Purchaser. This means the individual authorized by the Legal Entity to enter binding contracts on behalf of the Legal Entity. For example, an authorized signatory pursuant to a consent/resolution of the Legal Entity. Identification will be confirmed via receipt of a driver’s license, passport or other similar identifying document.
- Identity of the Purchaser and any Beneficial Owner(s) of the Purchaser. A “Beneficial Owner” is an individual who owns, directly or indirectly, 25% or more of the equity interests in the Purchaser. If the Purchaser is a limited liability company the name, address and tax identification numbers of all of its members, even members who do not own 25% or more of the equity in the Purchaser, must be provided to Advantage.
- Date of closing of the Covered Transaction.
- Total amount transferred in the form of a Monetary Instrument.
- Total purchase price of the Covered Transaction.
- Address of the real property involved in the Covered Transaction.
- Enter the term “REGTO” as the identifier in the Comments section of Form 8300.
Please contact Drew Steigler, Chief Underwriting Counsel, at
631.424.6100 or firstname.lastname@example.org
with any questions concerning this Bulletin.
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