From the Tax Law Offices of David W. Klasing - FinCEN Utilizing Geographic Targeting Orders to Identify Money Laundering Facilitated via Real Estate Transactions utilizing Shell Companies

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Tax Law Offices of David W. Klasing, PC

May 23, 2023, 06:37 ET

IRVINE, Calif., May 23, 2023 /PRNewswire/ -- The Financial Crimes Enforcement Network (FinCEN) is a bureau of the U.S. Department of the Treasury known to work closely with the criminal investigation division of the IRS. Their goal is to prevent and punish criminals who participate in money laundering and other financial crimes. FinCEN regularly tracks suspicious individuals and their activity by investigating mandatory disclosures made by financial institutions.

Why you should use an Attorney to represent you in an audit

In April of 2023, FinCEN announced the renewal and expansion of its Geographic Targeting Orders (GTOs). GTOs are authorized by the Banking Secrecy Act. They require U.S. title insurance companies to identify the natural persons behind shell companies used in non-financed purchases of residential real estate. In turn, this data helps FinCEN detect money laundering and other illegal activity that is performed through the purchase of real estate.

If suspect or know for a fact you are being investigated by FinCEN or the IRS for tax crimes including money laundering, seek help from our Dual-Licensed Tax Attorneys & CPAs at the Tax Law Offices of David W. Klasing by dialing (800) 681-1295.

Renewal and Expansion of Geographic Targeting Orders

GTOs require U.S. title insurance companies to name the individuals behind shell companies that are used for non-financed purchases or residential real estate. In April 2023, these orders were renewed and expanded to cover new parts of the country.

GTOs provide valuable data that helps FinCEN detect money laundering and other financial crimes. As an example, someone who acquires a large sum of money through illegal means may seek to make their funds appear legitimate by using a shell company to purchase real estate. Once a certain amount of time has passed, they will sell the real estate, and their newly acquired funds will seem legitimate. By allowing FinCEN to access the name of the person behind the shell company, the money laundering scheme may be disrupted.

Residential real estate transactions that are covered by the GTOs include purchases made with traveler's checks, cashier's checks, personal checks, certified checks, business checks, money orders, virtual currency, and funds transfers. The threshold for purchases that require GTOs can vary in different metropolitan areas.

New York City and Miami were the original targets when GTOs were first established in 2016. Since then, they have been continually expanded to cover metropolitan areas across the country. The latest expansion has included Litchfield County in Connecticut and several of the more populated counties in Colorado including Denver County, Jefferson County, Adams County, and Summit County.

What Are the Requirements for Geographic Targeting Orders?

GTOs require title insurance companies to file a FinCEN Form 8300 within 30 days of any covered transaction. This form will ask for a range of information related to the transaction at issue and the individual behind it. For example, the purchase price and date of the transaction must be provided. Furthermore, the address of the residential property being purchased must be listed.

Also, the FinCEN form will ask for the identity of the person primarily responsible for representing the purchaser. This individual must verify their identity by providing a copy of their driver's license, passport, or other identifying documents.

Lastly, the identity of any beneficial owners of the purchaser must be provided along with documentation verifying their identities. Significant civil penalties can be imposed on companies who willfully fail to comply with any of the aforementioned requirements.

There are several reasons someone may not want to attach their identity to a real estate purchase. You can address your concerns regarding GTOs by consulting with our Dual-Licensed Tax Attorneys & CPAs.

Potential Criticisms of Geographic Targeting Orders

There are multiple potential criticisms of GTOs. For instance, they may place an undue burden on businesses that must comply. GTOs require businesses to gather and report additional information on specific transactions, which can substantially increase their administrative duties and the cost of doing business.

Also, GTOs may deter legitimate transactions. Some purchasers may be reluctant to engage in certain real estate purchases because of the additional reporting requirements and scrutiny created by GTOs.

Another criticism of GTOs has to do with their effectiveness. These orders may be insufficient to deter financial crimes because criminals can simply find other ways to transfer their money outside of regulated industries.

GTOs can also be criticized for their lack of transparency. They are issued by FinCEN without public notice or comment. Accordingly, criticisms have arisen regarding the lack of transparency in this process.

Finally, GTOs may disproportionally impact certain groups of people, such as immigrants and individuals from other countries. These groups may be targeted because they are more likely to engage in the types of transactions covered by GTOs.

Federal Money Laundering Penalties

Federal money laundering penalties can be significant. Perpetrators can face between 10 to 20 years in prison. Furthermore, they may have to pay expensive fines. Fines for money laundering can reach up to $500,000 or two times the value of the laundered funds.

If the court has determined that a defendant has engaged in money laundering as part of a long-term criminal enterprise or terrorist activity, then the government may be able to impose additional penalties.

Lastly, the U.S. government considers money laundering in excess of $100,000 to be an aggravated felony. Therefore, noncitizens (green card holders) who are accused of this crime can be detained and may be subject to deportation proceedings if convicted.

Other Examples of Money Laundering Schemes

In addition to purchasing and reselling real estate to conceal illicit funds, there are several other examples of money laundering schemes. For instance, many people attempt to launder money through purchases of cryptocurrency. Virtual currencies such as Bitcoin are not regulated in a uniform way, making them a preferred vehicle to launder illegally-obtained funds.

Furthermore, criminals may attempt to launder money by "round tripping." This practice involves sending funds on a trip to various financial accounts, shell companies, individuals, and countries with low regulatory enforcement before being sent back to their original owner. After the "trip," the funds may appear to be legitimate.

If You Fear Being Accused of Money Laundering / Tax Crimes, You Can Call Our Dual Licensed Attorneys & CPAs for Help

If you have made large purchases of real estate without utilizing financing, get help reducing your criminal exposure for income tax evasion and money laundering from our Dual-Licensed Tax Attorneys & CPAs by calling the Tax Law Offices of David W. Klasing at (800) 681-1295.