FinCEN and Geographic Targeting Orders

Fin CEN: What is it?
FinCEN is the Financial Crimes Enforcement Network (FinCEN) and it is a division of the U.S. Treasury Department.  

Geographic Targeting Order (“GTO”):  What are those? 
As defined by the U.S. Treasury department, the mission of the Financial Crimes Enforcement Network is to safeguard the financial system from illicit use, combat money laundering and its related crimes including terrorism, and promote national security through the strategic use of financial authorities and the collection, analysis, and dissemination of financial intelligence. If the Director of FinCEN finds that reasonable grounds exist for required reporting to carry out the purposes of the Bank Secrecy Act (“BSA”) or to prevent evasions thereof, the Director may issue a reporting order on any domestic financial institution or nonfinancial trade or business or group of domestic financial institutions or nonfinancial trades or businesses in a geographic area.

Why have we started to see FinCEN reporting here in our market? 
The FinCEN GTO orders requiring the collection and reporting of information to the U.S. Treasury date back several years but we have not seen the impact very much as the orders have been specific to Texas counties that are outside of our market here.  Our closest neighbor that was subject to the order was Bexar County for quite some time.  In November last year, Travis County was added to the list of counties that are subject to the GTO. The Texas counties that now require FinCEN reporting are Bexar, Tarrant, Dallas, Harris, Montgomery, Webb, and Travis County. As the government expands these orders over time, we can expect to see the addition of more Texas counties. In short… you’re seeing them now because the order expanded to include Travis County effective 
November of 2023.  

What do the orders require? 
The GTO orders require a title company to collect and report information about the persons involved in certain residential real estate transactions.  During the closing process the title company is required to identify (and report to the GTO department) the individuals behind legal entities used in all cash purchase transactions. 
What types of transactions trigger FinCEN reporting? 
When a transaction has all of these components the title company is required to report the sale: 

  1. Cash transaction; 
  2. Without a bank loan or similar form of external financing (this means seller finance and private money loans are subject to review); 
  3. Residential property; 
  4. Being purchased by a legal entity (i.e. corporation, limited liability company, partnership, etc.); and
  5. A sales price of $300,000 or more.  

If a transaction has all five elements then the sale must be reported to the FinCEN.  

What does “report” mean?
This part sounds scarier than it really is.  When a transaction has all of the trigger components it is as simple as the buyer filling out a form that lists out all beneficial owners of the company (someone owning 25% or more of the company), providing copies of their entity governing documents, copies of their IDs, and providing the type of funds that will be used for closing.  This is all the information that the title company can (and should) collect from the buyer well before closing so that we can proceed towards an easy closing.  

Historically this information has not been required for closing so these requirements will feel unique to a real estate agent representing a cash buyer.  For that reason it is a good idea for realtors to educate themselves about this change that has been put into place for Travis County properties effective November of 2023. 

Not sure how this affects your client? 
Feel free to call your Texas National Title escrow officer.  Our closers are very well versed on the new requirements and can help your client navigate the transaction.

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