Articles

Fed Continues to Scrutinize Cash Purchases of Luxury Real Estate by Barry M. Brant, CPA


Posted on September 28, 2017 by Barry Brant

The Treasury Department’s Financial Crimes Enforcement Network (FinCEN) renewed until March 20, 2018, a geographic targeting order (GTO) aimed at combating money laundering and uncovering the identities of beneficial owners of shell companies and other legal business entities that purchase luxury residential real estate without a bank loan or other form of traditional financing. This is the second time that FinCEN has revised and extended the GTO that was first introduced in 2016.

 

Under the most recent guidance, the GTO requires title insurance companies to collect and report specific information about “covered transactions” that involve the use of cash, cashier’s check, certified check, traveler’s check, business or personal check, money order or funds transfer (including wire transfers) to purchase residential real estate located in certain jurisdictions when the purchase price exceeds the following specified amounts.

The information that title insurance companies must collect and report on FinCEN Form 8300 includes:

According to FinCEN, real estate transactions are often complex and vulnerable to abuse by illicit actors seeking to hide their anonymity and launder criminal proceeds. Approximately 30 percent of transactions reported under the GTO have involved a beneficial owner or purchaser representative that was also the subject of a Suspicious Activity Report (SAR) previously filed by a U.S. financial institution.

 

Individuals planning to purchase luxury residential real estate without traditional financing in the areas covered by the latest GTO should be prepared to be scrutinized by Federal authorities. By meeting with experienced accountants and financial advisors, legitimate all-cash buyers can become better prepared to structure these transactions and comply with reporting, recordkeeping and other disclosure requirements.

 

About the Author: Barry M. Brant, CPA, is director of Tax, Consulting and International Services with Berkowitz Pollack Brant, where he leads the firm’s private client group and provides guidance on complex tax matters, including multi-national holdings, cross-border treaties and wealth preservation and protection.  He can be reached at the CPA firm’s Miami office at (305) 379-7000, or via email at info@bpbcpa.com.