More high-end deals targeted by revised anti-fraud reporting rule

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Reporting requirements for title insurers and agents were expanded to cover more types of high-end real estate transactions, the Financial Crimes Enforcement Network said.

In addition, Honolulu, whose borders are contiguous with the island of Oahu, was added to the list of municipalities covered by the requirements, known as geographic targeting orders.

The requirements target expensive properties which are being purchased primarily using cash through a shell company. The goal is to identify if these properties are being used for money laundering.

An advisory aimed at financial institutions and others in the real estate business describing the money laundering risks associated with these transactions was also issued by Fincen.

"Each type of financial institution — defined by law to also include 'persons involved in real estate closings and settlements' — has certain anti-money laundering obligations and can provide valuable reporting on potential money laundering and terrorist financing," the advisory said.

The original GTOs were issued in January 2016 for the borough of Manhattan in New York City and Miami-Dade County. In July 2016, the rest of New York City; Broward and Palm Beach counties in Florida; Bexar County, Texas; San Diego County; Los Angeles County; and the Bay Area counties of San Francisco, San Mateo and Santa Clara were added.

The GTOs were renewed in February. The updated GTOs become effective on Sept. 22 and run through March 20, 2018.

"Through this advisory and other outreach to the private sector, Fincen, industry and law enforcement will be better positioned to protect the real estate markets from serving as a vehicle to launder illicit proceeds," Acting Director Jamal El-Hindi said in a press release.

The GTOs apply to purchases made without a bank loan or a similar form of external financing. Plus, the buyer must be using cash, a cashier's check, certified check, traveler's check, personal check, business check, money order or an electronic funds transfer to pay for all or part of the transaction.

Title companies need to report any transaction that meets those criteria within 30 days of the closing to Fincen. The report must include information about the identity of the person representing the purchaser as well as the beneficial owner of the property.

Through the previous GTOs, about 30% of reported transactions involve a beneficial owner or purchaser representative that was also the subject of a previous suspicious activity report, Fincen determined.

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