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FinCEN Geographical Targeting Order; Effective 3.1.16

By order of the Director of the Financial Crimes Enforcement Network (FinCEN), which is a bureau of the United States Department of the Treasury, certain title insurers (both direct underwriting operations and their agents), will be required to report to FinCEN certain details of residential property transactions that are consummated without the use of mortgage financing. The perception is that certain individuals may seek to “launder” funds that are accumulated through illegal activity by the purchase of high end real estate, using business entities to take title those properties, thereby concealing the beneficial ownership of the individuals (or even other entities) behind the entity that acquires title. In an effort to thwart that process, the following reporting procedure for certain transactions will become effective, on a trial basis, beginning March 1, 2016. The procedure will apply to transactions of residential properties located in New York County, NY and Miami, FL only. (for your information, the threshold for Miami-Dade County properties is $1,000,000).

The program will require any title insurer or agent thereof, to report with regard to any transaction where a “Legal Entity”, that is a “corporation, limited liability company, partnership or other similar business entity, whether formed under the laws of a state, or of the United States or a foreign jurisdiction”, purchases residential real property in New York County (Borough of Manhattan) NY for a total purchase price in excess of $3,000,000 and such purchase is made;

  1. without a bank loan or other form of external financing, and;
  2. such purchase is made, at least in part, using currency or a cashier’s check, a certified check, a traveler’s check or a money order in any form.

The information required to be reported includes:

  1. Information about the “identity of the individual primarily responsible for representing the Purchaser”, requiring the title insurer to “obtain and record a copy of this individual’s driver’s license, passport or other identifying documentation”;
  2. Information about the identity of the Purchaser;
  3. Information about the identity of the “Beneficial Owner(s)” defined as “each individual who, directly or indirectly, owns 25% or more of the equity interests of the Purchaser”, requiring the title insurer to “obtain and record a copy of this individual’s driver’s license, passport or other identifying documentation”.
  4. Other information regarding the date of the closing, the address of the subject property, the total purchase price of the property and total amount transferred in the form of a “Monetary Instrument”, which term is defined by the Code of Federal Regulations (31 CFR 1010.100 (dd)) but includes, currency, cashier’s checks, certified checks, personal checks and money orders among other forms of payment. 

This program and the reporting requirements will become effective on March 1, 2016 and will remain in effect until August 27, 2016, which expiration date could be extended.

As was stated at the outset, this reporting process will be required of those title insurance companies, and their agents, as directed by FinCEN/Dept. of Treasury. As of this writing, those companies known to have been ordered to comply include Old Republic National Title Insurance Company, First American Title Insurance Company, Fidelity National Title Insurance Company, Chicago Title Insurance Company, Commonwealth Land Title Insurance Company and Stewart Title Insurance Company.

If you would like further information on this topic, please call at your convenience.