The federal government announced this week that it will soon monitor and investigate all-cash purchases of luxury residential real estate in excess of $3 million in Manhattan and in excess of $1 million in Miami-Dade County for money laundering and other illicit activity.
The Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of Treasury, will lead the investigation. The investigation is targeting all-cash luxury real estate purchases because many such purchases are currently being conducted through “shell” companies used to shield the identities of natural persons and hide assets in a transaction. FinCEN’s Geographic Targeting Order (GTO), which is effective from March 1, 2016 through August 27, 2016, will require title insurance companies to identify and report natural persons behind these shell companies so that law enforcement investigators can use that information to weaken the ability of individuals to disguise their identities in money laundering schemes.
Since 2006, FinCEN has worked to establish an accountable mortgage industry by conducting studies regarding suspected mortgage fraud and money laundering and by issuing orders of investigation for certain financial institutions and transactions across the country.
FinCEN Director Jennifer Shasky Calvery declared that “cash purchases present a more complex gap that we seek to address.” The current investigation of luxury residential real estate will assist FinCEN in further establishing a more transparent system to avoid another financial crisis in the future.
Though currently temporary, the GTO may be extended into next year and expanded to include additional cities and counties.