Geographic targeting orders are a tool used by the Financial Crimes Enforcement Network (FinCEN) to detect and prevent money laundering. Geographic targeting orders impose AML requirements on obligated firms, in addition to standard Bank Secrecy Act (BSA) AML/CFT obligations, when they deal with certain transactions over a specified value.
Geographic targeting orders are often used by FinCEN to prevent money laundering on the high-value real estate market. Given their scope, financial institutions in the United States should understand the regulatory requirements that will be imposed upon them under a geographic targeting order and how their AML responsibilities will be affected.
A geographic targeting order (GTO) affects financial institutions within specific areas of the United States, imposing additional record-keeping and reporting requirements for transactions over a certain value. FinCEN issues GTOs under the authority of the BSA (31 USC 310).
Each GTO sets out the areas of the United States in which it is applicable and what types of firms must comply with its record-keeping and reporting obligations. GTOs are issued for a limited period of time. Prior to 2001, GTOs were valid for up to 60 days, but under the US Patriot Act, that limit was extended to 180 days. FinCEN can extend that 180-day period in certain circumstances.
Noncompliance with a GTO may result in both criminal and civil penalties. FinCEN may impose fines of up to $500,000 and seek individual prison sentences of between 5 and 10 years.
Under standard Bank Secrecy Act AML/CFT requirements, firms must submit reports to FinCEN for transactions that exceed $10,000. Under a GTO, FinCEN can set that threshold at any level, mandating reports for any transaction value.
Relevant transactions should be reported to FinCEN within 30 days. Like the standard BSA reporting requirement, GTO transaction reports should be submitted via IRS form 8300 and include the following information:
- The identity of the individual representing the firm, along with identity verification documents such as driver’s license or passport.
- The identity of the purchasing individual or entity, or the purchaser’s beneficial ownership.
- Transaction details, including the amount transferred, total purchase price and date of closure.
GTOs are often issued to prevent criminals using the real estate market to launder money. In 2019, FinCEN extended a geographic targeting order for high-value real estate transactions in locations across the United States, lowering the transaction reporting threshold to $300,000. The GTO applies to all title insurance companies handling real estate transactions that meet the following criteria:
- The purchaser is a legal entity, defined by the GTO as a corporation, LLC, partnership or similar.
- The transaction is valued at the GTO purchase price threshold, in this case $300,000.
- The purchase is made in cash without a loan or similar external financing.
- The purchase is made, in any part, using currency or check.
The geographic areas in which the GTO applies are:
- The Texas counties of Bexar, Tarrant or Dallas
- The Florida counties of Miami-Dade, Broward or Palm Beach
- The Boroughs of Brooklyn, Queens, Bronx, Staten Island or Manhattan in New York City, New York
- The California counties of San Diego, Los Angeles, San Francisco, San Mateo or Santa Clara
- The City and County of Honolulu in Hawaii
- The Nevada county of Clark
- The Washington county of King
- The Massachusetts counties of Suffolk or Middlesex
- The Illinois county of Cook
Firms must understand how GTO requirements will affect them and ensure the order is integrated into existing AML/CFT compliance programs. Under the BSA, firms should already have customer due diligence and transaction monitoring processes in place to identify customers and beneficial owners and should seek to align those objectives with the GTO for efficiency and accuracy. Similarly, AML/CFT teams should understand the details of a GTO and be prepared to ensure ongoing compliance should FinCEN extend the order past its 180-day limit.
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