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The Department of Treasury announced on Wednesday that it would work to increase transparency in luxury real estate transactions. The Financial Crimes Enforcement Network (FinCEN) yesterday issued Geographic Targeting Orders (GTO) that will, for the time being, require selected American title insurance companies to identify the buyer behind companies purchasing luxury real estate properties in all cash in Manhattan and Miami-Dade County—two of the most popular locations for international luxury real estate investment.
FinCEN is operating under the concern that some of these high-end transactions “may be conducted by individuals attempting to hide their assets and identity by purchasing residential properties through limited liability companies or other opaque structures.” Previously, FinCEN had taken action to eliminate money laundering in real estate purchases involving lending; this is the first instance in which the Network has addressed all-cash transactions.
With the identifying information collected, law enforcement will be able to investigate and address whether illegal activity occurs within these real estate dealings. In Manhattan, buyers in transactions exceeding $3 million will be identified, and in Miami-Dade County, buyers spending more than $1 million will be disclosed.
The initiative will be enforced from March 1 through August 27, 2016, and future reporting requirements will be implemented throughout the country if it is revealed that dirty money is a prevalent issue.
For anyone interested in upholding the law, this new initiative to track mysterious buyers, who may or may not be operating under suspicious circumstances, is welcome news. For the American housing market, and specifically the luxury real estate market, this matter might prove more complicated.
Out of fear of being exposed, buyers, domestic and international, may think twice before purchasing high-end American properties this year; that, or halt their American real estate spending habits for the 180-day period during which the initiative will be enforced. This change could have a tremendous impact on the U.S. housing market which enjoys, like clockwork, billions of dollars in business from luxury real estate deals.