The dominioFinancial Crimes Enforcement Network (FinCEN) recently announced two geographic targeting orders (GTOs) imposing new reporting and recordkeeping requirements on title insurance companies operating in New York City and Miami-Dade County. The requirements are effective beginning March 1, 2016, and continue in effect until August 27, 2016.

GTOs are temporary measures that FinCEN imposes on businesses when it believes additional reporting or recordkeeping is needed to prevent evasions of the Bank Secrecy Act. They are typically directed at businesses FinCEN believes are at high risk of being used for money laundering. In the past year, FinCEN has issued or renewed GTOs to electronics exporters in South Florida, armored-car services and common carriers transporting currency in parts of Texas and southern California, and check-cashing businesses in South Florida when cashing tax refund checks.

The new GTO requires each title insurance company to file a FinCEN Form 8300, commonly known as a Currency Transaction Report (CTR), within 30 days of an all-cash purchase of real estate worth over $3 million in Manhattan, or over $1 million in Miami-Dade County. More precisely, the CTR filing requirement applies to purchases (i) in Manhattan and Miami; (ii) by a partnership, corporation, LLC or other legal entity; (iii) for a purchase price over the respective threshold amounts; (iv) made without external financing; and (v) where payment is made “using currency or a cashier’s check, a certified check, a traveler’s check, or money order in any form.” These CTRs are due 30 days after closing.

The CTRs must identify not only the purchasing entity, but also any individual who beneficially owns 25 percent or more of the purchasing entity. This includes a requirement that insurers verify the identity and address of the beneficial owner in a manner that satisfies the CTR filing requirement, typically by reference to a driver’s license or passport. A copy of the identifying document must be kept on file.

The GTO also imposes recordkeeping requirements. Title insurers must retain all records relating to compliance with the GTO for five years after it expires. While that is currently August 27, 2016, FinCEN may extend the GTO by further order.

All-cash purchases were previously not subject to CTR or Suspicious Activity Report (SAR) requirements – making the high-end real estate market an attractive vehicle for foreign oligarchs to expatriate their wealth through shell companies, as reported by a 2015 New York Times exposé.

On a practical level, title insurers operating in Miami and Manhattan should ensure that their employees and compliance officers are notified of the GTO and CTR filing requirement and trained about what it requires. And they, along with other participants in the real estate market, should be on the lookout for further extensions of the order by FinCEN. The GTO represents an experimental effort to prevent the U.S. high-end real estate market from being used for money laundering. FinCEN will almost certainly investigate if all-cash purchases fall off as a result of its order (or tick upward sharply before the order takes effect), and how much. Depending on the quality of information gleaned from the CTRs and market data, FinCEN could make the CTR requirement permanent through rulemaking, expand it to other metro areas, modify the amount that triggers a filing requirement, or a combination of these. Since “dirty” money will always be looking for an entry point into the legitimate financial system, we can expect to see more FinCEN regulatory activity directed toward the real estate market in the future as criminals and law enforcement continue their efforts to outwit each other.