FinCEN Orders Title Insurance Companies To Share Data On All-Cash Buyers

Posted by Patrick Barnard on January 13, 2016 No Comments
Categories : Residential Mortgage

Although the share of all-cash buyers continues to fall, there has always been a nagging question as to how many all-cash transactions are tied to criminal activity.

According to CoreLogic, all-cash sales accounted for 32.5% of total home sales in September – a decrease of 3.4 percentage points compared with 35.9% in September 2014.

All-cash sales peaked in January 2011, when they accounted for 46.6% of transactions, according to the firm’s data. Prior to the housing crisis, they were about 25% of all sales.

One of the problems for the folks in law enforcement is that, in some cases, the buyer is allowed to hide behind a limited liability company or some other opaque structure, thus making it difficult for authorities to determine the actual owner of a property.

As such, the Financial Crimes Enforcement Network (FinCEN) is temporarily requiring certain title insurance companies in New York City and Miami-Dade County, Fla., to identify the persons behind companies used to pay ‘all cash’ for high-end residential properties.

In a release, FinCEN officials say the agency is concerned that certain individuals may be attempting to hide their assets and identity through these all-cash purchases. As a result, FinCEN will require certain title insurance companies to identify and report the true ‘beneficial owner’ behind a legal entity involved in certain high-end residential real estate transactions in Manhattan and Miami-Dade County.

‘We are seeking to understand the risk that corrupt foreign officials, or transnational criminals, may be using premium U.S. real estate to secretly invest millions in dirty money,’ says Jennifer Shasky Calvery, director of FinCEN, in a release. ‘Over the years, our rules have evolved to make the standard mortgage market more transparent and less hospitable to fraud and money laundering. But, cash purchases present a more complex gap that we seek to address. These [orders] will produce valuable data that will assist law enforcement and inform our broader efforts to combat money laundering in the real estate sector.’

FinCEN says the data to be provided by the title insurance companies will be added to its database. From there, it will be shared with other law enforcement agencies.

Authorities are careful to say that the title companies that are being asked to provide information are not being asked to do so as a result of any derogatory finding by FinCEN with respect to the covered companies.

The orders will go into effect on March 1 and will expire on Aug. 27, according to the release.

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