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Feds significantly expand investigation into all-cash real estate deals

Title insurance companies’ reporting threshold lowered to $300,000

Title insurance companies in 12 of the nation’s largest markets will now have to provide federal authorities with substantial details on all real estate deals of $300,000 or more if the buyer is paying all cash.

The requirement comes at the hands of the Treasury Department’s Financial Crimes Enforcement Network, which is significantly expanding its investigation into whether foreign buyers are using shell companies to buy U.S. real estate in order to launder money.

The investigation has been going on for almost three years and has been expanded several times.

The initial FinCEN investigation looked at unknown buyers using shell companies to buy high-end real estate in Manhattan and Miami-Dade County, because the government was “concerned about illicit money” being used in the deals.

The results of that initial investigation showed more than 25% of transactions covered in the initial inquiry involved a “beneficial owner” who is also the subject of a “suspicious activity report,” which is an indication of possible criminal activity.

The initial investigation also led FinCEN to expand the probe to include all of New York City, Los Angeles, San Francisco and several other areas. The investigation was later expanded again to include wire transfers.

Throughout the investigation, FinCEN focused on luxury real estate, setting the reporting thresholds for title companies at $500,000 or above. In Manhattan, for example, title companies were only required to identify the actual person behind shell companies used to pay all cash on deals of $3 million or more.

But now, FinCEN is dramatically lowering the reporting threshold and expanding the investigation to several new cities.

Going forward, title companies in Boston; Chicago; Dallas-Fort Worth; Honolulu; Las Vegas; Los Angeles; Miami; New York City; San Antonio; San Diego; San Francisco; and Seattle will all be required to report on the person behind shell companies on all-cash deals of $300,000 or more.

Previously, cash deals in New York City, Miami, Los Angeles, San Francisco, San Diego, and Bexar County, Texas, which includes San Antonio, were included in the investigation.

FinCEN is also now requiring title companies to report on purchases above that threshold that are made using cryptocurrency, as well.

“Previous (geographic targeting orders) provided valuable data on the purchase of residential real estate by persons implicated, or allegedly involved, in various illicit enterprises including foreign corruption, organized crime, fraud, narcotics trafficking, and other violations,” FinCEN said in a statement. “Reissuing the GTOs will further assist in tracking illicit funds and other criminal or illicit activity, as well as inform FinCEN’s future regulatory efforts in this sector.”

Under the newly issued orders, title companies in the aforementioned cities will have to report on the actual buyer behind the shell company until May 15, 2019, at least.

For more on the latest order, click here.

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