Below is a bulletin we received from First American Title Insurance Company. However, the Geographic Targeting Order affects all title insurance underwriters and issuing title agents who close residential real estate transactions in Manhattan. The new regulatory rules and requirements will impact you as a closing attorney, so please review the below and become familiar with the new regulation. If you have any further questions, please contact our office.
On January 13, 2016, the United States Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) issued a Geographic Targeting Order (“Order”) (click here: https://registration.firstam.com/creativeservices/memos/FinCEN2/RealEstateGTOOrderFinal_1_13_16_Manhattan.pdf) creating new reporting requirements that will affect residential real estate transactions involving real property in the Borough of Manhattan in New York, New York. These new reporting requirements apply to “Covered Transactions” (as defined below) that occur from March 1, 2016 until August 27, 2016. The Order requires First American Title Insurance Company (“First American” or the “Company”) and First American’s issuing agents to collect and report information about the persons involved in certain residential real estate transactions (“Covered Transactions”) in which First American is involved (i.e. the Company insures the transaction, conducts a settlement or performs a service). The Order states that First American and First American’s issuing agents may be liable, without limitation, for civil or criminal penalties for violating any of the terms of the Order.
The Order defines a “Covered Transaction” as one in which:
1. A Legal Entity, whether formed under the laws of a state or of the United States or a foreign jurisdiction, defined in the Order as:
* Corporation;
* Limited Liability Company;
* Partnership; or
* Other similar business entity
2. Purchases residential real property, defined by FinCEN as real property (including individual units of condominiums and cooperatives) designed principally for the occupancy of from one to four families, located in the Borough of Manhattan in New York, New York;
3. For a total purchase price in excess of $3,000,000;
4. Such purchase is made without a bank loan or other similar form of external financing (*1*); and
5. Such purchase is made, at least in part, using currency or a cashier’s check, a certified check, a traveler’s check, or a money order in any form.
The Order requires that information be provided on IRS/FinCEN Form 8300 (“Form 8300”) for a Covered Transaction including
1. the identity of the Purchaser;
2. the identity of the Beneficial Owner(s) (*2*) of the Purchaser; and
3. the identity of the individual primarily responsible for representing the Purchaser.
The Order sets out specific instructions for completing Form 8300, many of which supersede the preprinted instructions on the Form 8300. Keep in mind, when the reporting instructions in the Order conflict with the Form 8300 preprinted instructions, the terms of the Order apply.
Standard:
FinCEN is requiring First American, its subsidiaries, direct operations and issuing agents to comply with the Order for all Covered Transactions beginning March 1, 2016 and ending August 27, 2016. THEREFORE, UNLESS AND UNTIL YOU POSSESS THE INFORMATION NECESSARY TO COMPLY WITH THE ORDER PRIOR TO CLOSING THE TRANSACTION, YOU ARE PROHIBITED FROM ISSUING TITLE INSURANCE ON A COVERED TRANSACTION. In addition, First American requires its agents to do the following:
1. Commitment Requirement – Every Commitment For Title Insurance involving residential property in the Borough of Manhattan in New York, New York, must contain the following requirement in Part 1 of Schedule B:
* (__) If (i) the purchase price for the interest in the real property (including coops) is in excess of $3 million in the Borough of Manhattan, (ii) the purchase is made without a loan from an institutional lender, and (iii) the purchaser is a corporation, limited liability company, partnership or similar business entity, then, either:
* The Company must be furnished with a written statement from purchaser’s counsel or the settlement agent, stating that none of the purchase price was funded through the use of currency, cashier’s check(s), certified check(s), traveler’s check(s), or money order(s), or
* The Company must be furnished with information sufficient to enable it to file IRS/FinCEN Form 8300, in accordance with FinCEN Geographic Targeting Order dated January 13, 2016, or any renewal thereof. If this sub-paragraph (B) applies, please contact the Company for specifications relating to the required information.
2. Determining and Reporting “Covered Transactions” – Direct offices and title issuing agents must complete and transmit the “Geographic Targeting Order Questionnaire” (“Questionnaire”) regarding all transactions in the Borough of Manhattan in New York, New York, where the purchase price is in excess of $3 million. The Questionnaire must be submitted within 5 business days of closing. If reporting is required, the completed Form 8300 must be e-filed with the Financial Crimes Enforcement Network. A copy of all records relating to compliance with the Order must be maintained for a period of five years from the last day the Order is effective (including any renewals of the Order).
3. Accommodation Recordings – Accommodation recordings by the Company are prohibited during the pendency of the Order, unless evidence of compliance with the Order is obtained.
(*1*) Loans financed by a U.S. financial institution, such as a bank or credit union that is required to have an antimoney laundering policy.
(*2*) “Beneficial Owner” means each individual who, directly or indirectly, owns 25% or more of the equity interests of the Purchaser (Order at III.A.1.i.). However, if the purchaser involved in the Covered Transaction is a limited liability company, then the Covered Business must provide the name, address, and taxpayer identification number of all its members, to the extent not otherwise provided on the Form 8300 (Order at II.B.2.vi.2.).
