Concerned that secretive purchases of luxury real estate are being used to hide ill-gotten gains, the federal government launched a test program earlier this year to discover the true identities of all-cash buyers for high-end properties hidden behind an L.L.C. or other shell entity in Manhattan and Miami-Date County, Florida.
And with “a significant portion” of the hidden all-cash transactions investigated over the past five months having “indicated possible criminal activity associated with the individuals reported to be the beneficial owners behind [the] shell company purchasers,” the Financial Crimes Enforcement Network (FinCEN) will expand the reach of the program to include (1) all boroughs of New York City; (2) Miami-Dade County and the two counties immediately north (Broward and Palm Beach); (3) the county that includes San Antonio, Texas (Bexar County); (4) San Diego County; (5) Los Angeles County; and (6) San Francisco, San Mateo and Santa Clara counties, as of August 28.
As such, U.S. title insurance companies will be required to identify the natural persons behind any shell company that pays all-cash for residential real estate valued at over $2 million in San Francisco, San Mateo and Santa Clara. The high-end threshold in Manhattan is 50 percent more.
“The information we have obtained from our initial [Geographic Targeting Orders (GTOs)] suggests that we are on the right track,” said FinCEN Acting Director Jamal El-Hindi. “By expanding the GTOs to other major cities, we will learn even more about the money laundering risks in the national real estate markets, helping us determine our future regulatory course.”