August 30, 2016
Advantage Title: Industry Bulletin 2016-02
Additional Geographic Targeting Order
On January 13, 2016, the United States Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) issued two Geographic Targeting Orders (collectively, the “Original GTO”) requiring “certain U.S. title insurance companies to identify the natural persons behind companies used to pay ‘all cash’ for high-end residential real estate in the Borough of Manhattan in New York City, New York, and Miami-Dade County, Florida.” Please refer to Industry Bulletin 2016-01 issued by Advantage Title on February 26, 2016.
The Original GTO expired on August 27, 2016.
NEW ORDER REQUIREMENTS
FinCen has now issued a further Geographic Targeting Order dated July 26, 2016 (“Additional GTO”) which changes some of the requirements of the Original GTO.
WHAT CHANGED FROM THE ORIGINAL GTO?
There are three main changes between the Original GTO and Additional GTO.
- The Additional GTO covers all title underwriters and their agents instead of select title underwriters and their agents.
- The covered jurisdictions are expanded beyond Manhattan, NY and Miami-Dade County, FL. Please see below for more detail regarding the expanded geographic scope of the Additional GTO.
- Payments made using personal or business checks are covered and reportable.
WHAT IS THE EFFECTIVE DATE OF THE ADDITIONAL GTO?
The Additional GTO, relative to all Covered Transactions (defined below) takes effect on August 28, 2016 and will remain in effect, unless otherwise extended by FinCEN, through February 23, 2017.
WHO IS BOUND BY THE ADDITIONAL GTO?
A Covered Business which is defined by the Additional GTO as the title underwriters that were recipients of the Additional GTO and any of their subsidiaries and agents. As stated above, all title underwriters are recipients of the Additional GTO and, as a title agent of those title underwriters, Advantage Title Agency, Inc. (“Advantage”) is bound by the Additional GTO.
WHAT TRANSACTIONS ARE SUBJECT TO THE ADDITIONAL GTO?
The Additional GTO only applies to a “Covered Transaction” as defined in the Additional 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 Additional GTO covers Miami-Dade, Broward and Palm Beach Counties in Florida, Bexar County in Texas, and Los Angeles, San Diego, San Francisco, San Mateo and Santa Clara Counties in California.
- 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.
- The Purchaser is a Legal Entity which is defined under the Additional 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 or money order (collectively, “Monetary Instrument”). There is no de minimis exception regarding the methods of payment. Wire transfers do not trigger a reporting requirement. 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.
NOTE A: The source of funds must be taken into consideration when determining whether this standard is met. For example, if the Purchaser pays their contract deposit via certified check to the Seller’s counsel and the Seller’s counsel wires the amount of the contract deposit to the Seller’s bank account at closing, this criterion has been met because the contract deposit was paid via a certified check.
NOTE B: The Company has received informal guidance from the American Land Title Association (“ALTA”) based upon feedback received by ALTA from FinCEN that an attorney escrow check is considered a “business check”. As a result, payment of any portion of the purchase price via attorney escrow check will trigger this aspect of the reporting requirement.
NOTE C: The Additional GTO reporting requirement is only triggered when the purchase of the real property is funded through a Monetary Instrument. The Additional GTO does 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 a certified check or personal check, there is no reporting requirement.
HOW WILL ADVANTAGE COMPLY WITH THE ADDITIONAL GTO?
When insuring a Covered Transaction, 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, a personal check, a business 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.
- 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 email@example.com
with any questions concerning this Bulletin.
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