This past January, we featured a post explaining a new order issued by the United States Department of Financial Crimes Enforcement Network (FinCEN), where it began cracking down on secret real estate buyers in certain parts of the U.S., which included Miami-Dade County.
The Geographic Targeting Orders (GTO) was a temporary directive requiring title insurance companies to identify “all cash” purchasers of high-end residential properties in Manhattan and in Miami-Dade County, Florida. The GTO was in effect on March 1, 2016, and was set to expire of August 27, 2016.
Growing Reach of the Government
On July 27, 2016, FinCEN announced a renewal and expansion to the GTO, making it applicable to purchasers in various parts of the country including all of New York City; Los Angeles; San Francisco; and Broward and Palm Beach Counties, Florida. Each county has a threshold for triggering the requirements of the GTO.
In the South Florida Counties, the trigger is purchases of $1,000,000.00 or more that are paid without a bank loan and with some sort of currency or check. Even if just a small part of the purchase is paid with currency or check, say $10,000.00, the GTO is triggered. As if the Government expanding the GTO was not enough, the use of the ambiguous term “currency” allows the Government to include, and require reporting of, transactions that include other payment methods, such as the virtual currency Bitcoin.
The purpose of the GTO is to target “illicit actors” using companies, or other business entities, to hide their assets and identity or to launder money. Its effect is that it requires title insurance companies to report these transactions as they occur and keep records for at least five years.
Impact on South Florida
While South Florida has seen its fair share of “illicit actors,” the reality is that it is also a playground and investment hub for the rich and famous. With its expansion in South Florida, the impact is even greater as it now affects purchases in the tri-county area.
Based on a first quarter decrease in purchases of high-end real estate this year, the expansion of the GTO adds insult to injury. The GTO stymies foreign investors from entering this economy and purchasing high-end real estate. Foreign buyers, who most commonly use corporations and pay in cash (even if just a small portion), are directly targeted by the GTO. Developers of high-end condominiums in South Florida often rely on foreign buyers to help fill these properties. Any hesitation by foreign buyers in purchasing up those properties will have a direct negative impact on the South Florida economies.
Although these regulations are new to all of us, whether you are a buyer, seller, lender, or title company, we can help you navigate these uncertain waters.
From the Trenches,