FinCen Expands Title Insurance Program on Shell Companies

In an effort to prevent high-end real estate purchased through LLCs or other shell companies from becoming a money-laundering channel, FinCen created a pilot program to use title insurance companies to reveal beneficial ownership. That program has now been expanded to include Hawaii and six other cities:

In January 2016, FinCEN issued GTOs to require U.S. title insurance companies to report beneficial ownership information on legal entities, including shell companies, used to purchase certain luxury residential real estate in Manhattan and Miami—specifically, luxury residential property purchased by a shell company without a bank loan and made at least in part using a cashier’s check or similar instrument.  In July 2016 and February 2017, FinCEN reissued the original GTOs and extended coverage to all boroughs of New York City, two additional counties in the Miami metropolitan area, five counties in California (including Los Angeles, San Francisco, and San Diego), and the Texas county that includes San Antonio.

These rules apply to real estate transactions, not art. And there is very little evidence that art is being used for money laundering. Nonetheless, tighter controls on real estate transactions may have the effect of diverting more surplus cash into tangible assets like art and collectibles.

FinCen Targets Shell Companies Purchasing Luxury Properties in Seven Major Cities