November 26, 2018
Advantage Title: Industry Bulletin 2018-02
New Geographic Targeting Order -
Effective November 17, 2018
On November 15, 2018, 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.
The New GTO supersedes the GTO previously issued on April 13, 2018, which expired on November 16, 2018 (“Prior GTO”). By its terms, the Prior GTO was confidential. As a result, Advantage Title Agency, Inc. (“Advantage”) did not provide a bulletin regarding the Prior GTO. The New GTO expressly provides that it is not confidential.
WHAT CHANGED FROM THE PRIOR GTO?
There are two significant revisions contained in the New GTO.
- The New GTO no longer includes Trusts in the definition of Legal Entity as set forth in Section III.A.1.(ii) of the New GTO.
- The purchase price that triggers a reporting requirement is $300,000.00 irrespective of the location of the subject residential real property.
WHAT IS THE EFFECTIVE DATE OF THE NEW GTO?
The New GTO, relative to all Covered Transactions (defined below), takes effect on November 17, 2018, and will remain in effect, unless otherwise extended by FinCEN, through May 15, 2019.
WHO IS BOUND BY THE NEW 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 NEW 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, Tarrant and Dallas Counties in Texas, Los Angeles, San Diego, San Francisco, San Mateo and Santa Clara Counties in California, Clark County in Nevada, King County in Washington, Suffolk and Middlesex Counties in Massachusetts, Cook County in Illinois 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 $300,000.00.
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 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, wire transfer or virtual currency (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. Also, an attorney trust or escrow check is considered a business check for reporting purposes.
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 NEW GTO?
When insuring a Covered Transaction, Advantage must receive information sufficient to enable Advantage to complete and file the FinCEN Currency Transaction Report (“Currency Transaction Report”) through the Bank Secrecy Act’s electronic filing system. This will entail completion and execution of the ALTA FinCEN Information Collection Form by the Purchaser, their counsel or some other party authorized by the Purchaser to provide the information necessary to complete the form.
WHAT INFORMATION IS NECESSARY TO COMPLETE THE CURRENCY TRANSACTION REPORT?
- 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, directly or indirectly, owns 25% or more of the equity interests in the Purchaser.
- Date of closing of the Covered Transaction.
- Total purchase price of the Covered Transaction and the method of payment.
- Address of the real property involved in the Covered Transaction.
WHAT HAPPENS IN THE EVENT THAT ADVANTAGE DOES NOT RECEIVE THE INFORMATION AND DOCUMENTATION SUFFICIENT TO COMPLY WITH THE NEW GTO AND COMPLETE THE CURRENCY TRANSACTION REPORT?
Advantage will be unable to close and insure 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.