By Terri Luttrell, CAMS-Audit, Senior Manager of Strategy and Evangelism, Banker’s Toolbox 

FinCEN Reissued GTO

Updated GTO Includes 12 Additional Metro Areas: Three Things You Need to Know

On November 15, 2018, the Financial Crimes Enforcement Network (FinCEN) reissued their Geographic Targeting Orders (GTOs) to include 12 additional metropolitan areas (read here). GTOs are authorized under the Bank Secrecy Act to detect money laundering and other illicit activity through the purchases of real estate. Additionally, the new GTO lowers the purchase threshold for real estate transactions and includes virtual currency purchases.

The GTO requires U.S. title insurance companies, their subsidiaries and agents, to determine the beneficial owners (natural person) behind certain entities used in “covered” residential real estate transactions (cashier’s checks, certified checks, traveler’s checks, personal checks, business checks, money orders, funds transfers, or virtual currency). Previous GTOs have provided valuable information to law enforcement by following the funds used for various criminal activities, including foreign corruption, organized crime and drug trafficking.

Real estate purchases have been a successful vehicle for laundering money for many years, particularly through shell companies and this GTO looks to further crack down on that.

Under the FinCEN reissued GTO, the purchase price of residential real estate property has been lowered to $300,000, which was previously set by each individual city to specifically target luxury real estate. Lowering the threshold amount states that money laundering is widespread in accessible real-estate, not only on higher-end properties.

New York City and Miami were the original targets under the first order in 2016, but it has expanded periodically since then. The newest order now includes the counties which house some of the largest metropolitan areas in the U.S. including:

  • Boston
  • Chicago
  • Dallas-Fort Worth
  • Honolulu
  • Las Vegas
  • Los Angeles
  • Miami
  • New York City
  • San Antonio
  • San Diego
  • San Francisco
  • Seattle

So, what does this mean to your financial institution?

  1. Financial institutions should have procedures in place to ensure the detection of these transactions.
    While it is the title insurance companies that are required to collect and report data on covered transactions, financial institutions should have procedures in place to ensure detection of these transactions. Additionally, they should include reasonable due diligence to determine whether activity which would require suspicious activity reporting.

  2. Pay attention to red flags for suspicious activity related to real estate purchases.
    These red flags include cash payments/payoffs on loans, early payoffs, large wire transfers for loan payment and other red flags for suspicious activity. Monitoring systems and/or procedures should automatically alert the BSA department to these types of activity.

  3. Real estate lending BSA training should include GTO guidance.
    This training should specifically include how to identify red flags at loan origination. With the new Customer Due Diligence rule fully in force, beneficial ownership should be a given for all lines of business but enhanced training on “why” collecting beneficial ownership information is critical and will equip your lenders with what they need to know to detect and report illicit activity.

FinCEN issued guidance in 2017 for financial institutions and GTO responsibilities (FIN-2017-A003), which can be found here. FinCEN also issued FAQs which you may find here.

For more information, see the American Land Title Association Fact Sheet here.

– Terri Luttrell, CAMS-Audit

Luttrell is a seasoned AML professional with over 20 years in the banking industry, working both in medium and large community and commercial banks ranging from $2 billion to $330 billion in asset size. Terri is currently Senior Manager of Strategy & Evangelism at Banker’s Toolbox. Banker’s Toolbox is the leading enterprise risk management solution for financial institutions, offering a suite of products to help mitigate risk and streamline compliance. The Banker’s Toolbox team is a unique combination of seasoned bankers, former regulators, and information technology consultants who specialize in designing, developing, and implementing risk management solutions while providing unparalleled customer service.