Treasury Department Expands Its Investigation Into Luxury Real Estate Money Laundering

In January, the Financial Crimes Enforcement Network – part of the Treasury Department – announced to Geographic Targeting Orders (GTOs) to monitor all cash luxury transactions in Manhattan and Miami.

Their goal? To identify possible money laundering operations. And it worked. So much so that they are now launching more GTOs.

The information we have obtained form our initial GTOs suggests that we are on the right track,” said FinCEN Acting Director. FinCEN is expanding the range of its investigation to include all title transactions (including those via business and personal check).

In addition to renewing orders in Miami-Dade County and Manhattan the next round of GTOs will include:

  • The remaining Burroughs of New York
  • Broward and Palm Beach counties
  • Los Angeles County
  • San Francisco, San Mateo and Santa Clara
  • Sand Diego County
  • Bexar County in Texas (which includes San Antonio)

The new order take effect August 28th and will remain in place for 180 days until February 23rd.

The decision to expand the investigation stems from the first wave of data which found that “over a quarter of transactions (covered by the January GTOs) involve a beneficial owner or purchaser representative that is also the subject of a suspicious activity report.”

A few of these suspicious activities include a beneficial owner that engaged in $16 million in suspicious cash withdrawal a beneficial owner possibly involved in dealing with counterfeit checks’ and a beneficial owner connected toa network of shell companies that received about$7 million in suspicious wire transfers from businesses in South Africa.

“The January GTOs help link the previously unconnected suspicious activity to the true purchasers of luxury property in Manhattan and Miami,” a FinCEN official reported. “This corroborates FinCENs concern that transactions covered by the GTOs (i.e. all-cash luxury purchases of residential properties by a legal entity) are highly vulnerable to abuse by money laundering.”

While the GTOs are providing valuable data, they are, by no means, a lasting solution to the issue of money laundering in US real estate. The long game is to leverage the information to navigate future FinCEN regulations.

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