Unfortunately, money laundering occurs in real life — and not just by Jason Bateman in “Ozark.”
Traditional hotspots have been California, Miami, New York, Chicago. But guess who just made the list!
The US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a new Geographic Targeting Order with reporting requirements that affect real estate transactions in Washington, D.C., Northern Virginia, Maryland and especially Baltimore!
As of 4/29/2022, if your CASH buyer is paying as little as $50,000 in Baltimore City and County, or $300,000 in Maryland, D.C. or Virginia, they may have some explaining to do.
It should be noted that this does not apply to Individuals, Trusts, Estates, or Publicly Owned Companies. However, if you intend to work with Investors and/ or LLCs, keep reading …
First let’s talk about how money laundering works:
- COLLECTION – Cash is acquired through crime, corruption or illegal means.
- PLACEMENT – A common way “dirty” money is introduced into the financial system is a process known as “scaling.” Criminal entities will take large amounts of money and divide them into less obvious and harder-to-track sums for deposit into different banks.
- LAYERING – Illicit money is blended with legitimate money and placed into constant motion from on account to another, into the stock market or various foreign currency exchanges. The goal is to distance the money from the crime and make it as hard to track as possible.
- INTEGRATION – The untraceable money re-enters into the legitimate economy by purchasing long-term investments like vehicles, business ventures, luxury assets and … you guessed it … real estate!
The real target of the new FinCEN policy are shell companies purchasing real estate in our area. Many shell companies have a legitimate business use such accounting purposes or holding companies under an investment fund. However, law enforcement is increasingly concerned about corrupt officials, drug traffickers and even terrorists using shell companies to mask transactions. These transactions show up in our world as cash purchases.
The new GTO Information Collection Form requires title companies to report the Beneficial Owners (25% or more) of all legal entities or series of legal entities (remember layering?) purchasing with cash.
I’m sure your client is clean, but Investors or anyone buying with cash under an LLC are now subject to the same GTO Form and investigation.
Contact Nelson Schwartz at Nschwartz@chartertitlemd.com or (410) 946-0201 if you are an agent or investor who works with LLCs. We are happy to share with you the required GTO Information Collection Form and answer all questions regarding the new FinCEN policies.