FinCEN Real Estate Effort Underscores Need to End Anonymous Companies

Statement by the FACT Coalition on Treasury Department Decision to Renew and Expand Geographic Targeting Orders to Identify Buyers in Luxury Real Estate

WASHINGTON, D.C. – The Financial Crimes Enforcement Network (FinCEN), a branch of the U.S. Treasury Department, announced Tuesday that it was renewing and expanding its temporary orders seeking to uncover illicit activity in the luxury real estate sector. The move was welcomed by experts with the Financial Accountability and Corporate Transparency Coalition (FACT Coalition), a non-partisan alliance of more than 100 state, national, and international organizations promoting policies to combat the harmful impacts of corrupt financial practices.

The Geographic Targeting Orders (GTOs) — which were set to expire Tuesday — require U.S. title insurance companies to identify the real people, or “beneficial owners,” behind shell companies used to pay “all cash” for luxury real estate in the Los Angeles, Miami, New York, San Antonio, San Diego, and San Francisco metropolitan areas for a six-month period.  Today, FinCEN decided to renew the GTOs for all six metropolitan areas and expand the program to cover the City and County of Honolulu, Hawaii.

In renewing the GTOs, FinCEN also noted that their “data indicate that about 30 percent of reported transactions involve a beneficial owner or purchaser representative that was also the subject of a previous suspicious activity report.  This corroborates FinCEN’s concerns about this small segment of the market in which shell companies are used to buy luxury real estate in ‘all-cash’ transactions.”

Clark Gascoigne, the deputy director of the FACT Coalition, issued the following statement welcoming the announcement:

“Today, the U.S. Treasury correctly extended an important pilot project operating in roughly a half dozen metropolitan areas to crack down on bad actors who hide illicit funds in high-end real estate.

“In renewing the project, FinCEN notes that, in 30% of the real estate deals covered by the rule, the purchaser was someone who had a suspicious activity report filed on them.  Think about that for a moment.  Almost a third of these transactions were of suspicious origin.

“As we develop new economic sanctions for North Korea, we should keep in mind that just this past June, the Justice Department won a case involving the government of Iran and that nation’s efforts to evade economic sanctions by using an anonymous shell company formed in New York to purchase real estate in Manhattan.

“It is time to end the use anonymous shell companies to launder money for a wide variety of illegal and dangerous purposes – terror financing, human trafficking, drug trafficking, and sanctions evasion among others.

“We encourage the Treasury Department to take the next step and develop permanent rules to prevent anonymous companies from using real estate to hide illicit funds.  Even more important, Congress should quickly pass bipartisan legislation to require the real owners to be listed when forming a company.”

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Notes to Editors:

Journalist Contact:

Clark Gascoigne
Deputy Director, The FACT Coalition
+1 202 827-6401
cgascoigne@nullthefactcoalition.org