In January 2016, the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) issued an order that would require title insurance companies to report the identities of people behind any company paying cash for luxury residential real estate in Miami-Dade County and Manhattan.
The order was executed under the Bank Secrecy Act, and becomes effective as of March 1, 2016. This is the first time the U.S. government has required title companies to disclose the identities of individuals in companies that buy luxury residential real estate for cash. The order is temporary and will expire on August 27, 2016, although title companies will be required to keep records on individuals for five years after the expiration date.
FinCEN has shown an interest in investigating luxury real estate sales involving buyers that are LLCs, partnerships or other legal entities. This interest has been spurred in part by media reports of foreign buyers using companies to shelter money in the U.S. The FBI has also set up a special unit focused on money laundering and indicated that real estate will be an area of interest.
The new order specifies that title insurance companies must identify “beneficial owners” of any legal entity involved in a residential real estate investment of more than $1 million in Miami-Dade County and more than $3 million in Manhattan. A “beneficial owner” is defined as anyone with an equity interest of 25% or more in a legal entity.
A title insurance company is required to provide the beneficial owner’s name and driver’s license or passport information by submitting IRS Form 8300 within 30 days of closing. If an LLC is involved, title insurance companies must provide the name, address and taxpayer ID number of all LLC members. Title insurance companies are required to keep all these records on file for up to five years and make them available to FinCEN and other law enforcement agencies upon request.
Real estate transactions that are conducted in part or totally in cash, money orders, cashier’s, certified or traveler’s checks are subject to this order. Transactions conducted entirely via wire transfer are not subject to the reporting requirements.
The attorneys at Jurado & Farshchian, P.L. combine their knowledge and experience in Florida real estate law to represent both buyers and sellers of Florida real estate. Contact one of our experienced Florida real estate attorneys at (305) 921-0440, or email us at info@jflawfirm.com.
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