February 26, 2016
Advantage Title: Industry Bulletin 2016-01
Geographic Targeting Order of the Director of the Financial Crimes Enforcement Network, United States Department of Treasury
On January 13, 2016, the United States Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) issued two Geographic Targeting Orders (“GTOs”) requiring “certain U.S. title insurance companies to identify the natural persons behind companies used to pay Ďall cash’ for high-end residential real estate in the Borough of Manhattan in New York City, New York, and Miami-Dade County, Florida.” The purpose of the GTOs is to assist FinCEN and other federal agencies with the identification of potential money laundering. Under the USA Patriot Act of 2001 and its corresponding amendments to the Bank Secrecy Act, FinCEN can issue orders to institutions like title insurers to assist them in gathering information about transactions. The GTOs place a reporting requirement on the Covered Business (defined below). When insuring a Covered Transaction (defined below), the reporting requirement is fulfilled by title company completion and submission of IRS/FinCEN Form 8300 within 30 days of the closing of the Covered Transaction.
What is the effective date of the GTOs?
The GTOs are effective March 1, 2016 and, unless extended by FinCEN, expire on August 27, 2016. As a result, any Covered Transaction (defined below) that closes on or after March 1, 2016 is affected by the GTOs.
Who is bound by the GTOs?
A Covered Business which is defined by the GTOs as the title underwriters that were recipients of the GTOs and any of their subsidiaries and agents. As a result, Advantage Title Agency, Inc. (“Advantage”) is bound by the GTOs issued to the recipient title underwriters (the “Underwriter Recipients”).
What transactions are subject to the GTOs?
The GTOs only apply to a “Covered Transaction” as defined in the GTOs. A Covered Transaction means any real estate transaction that meets all of the following criteria:
- Purchase of real property located in the Borough of Manhattan, County of New York, NY or Miami-Dade County, FL.
- 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 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 exceeds $3,000,000.00 ($1,000,000 when the property is in Miami-Dade County, Florida). 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.
- The Purchaser is a Legal Entity which is defined under the GTOs 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 purchase is made without a 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, cashier's check, certified check, traveler's check or money order (collectively, “Monetary Instrument”). There is no de minimis exception regarding the methods of payment. Personal checks, business checks and wire transfers do not, in and of themselves, trigger a reporting requirement. Please note, the GTOs reporting requirement is only triggered when the purchase of the real property is funded through a Monetary Instrument. The GTOs do not cover the form of payment of a settlement service. So, if the purchase price is funded solely through wire transfer and payment of a settlement service is made via certified check, there is no reporting requirement.
How will Advantage comply with the GTOs?
When insuring a Covered Transaction through one of the Underwriter Recipients, Advantage must receive either (a) a written statement from Purchaser’s counsel or the settlement agent stating that no part of the purchase price was funded by use of currency, a cashier’s check, a certified check, a traveler’s check or a money order, or (b) information sufficient to enable Advantage to complete IRS/FinCEN Form 8300.
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.
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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