New Order Affecting All-Cash Luxury Real Estate Purchases in Miami Starts Today

 
The Financial Crimes Enforcement Network (“FinCEN”), within the U. S. Department of Treasury, issued two Geographic Targeting Orders (“GTO”) on January 13, 2016 requiring certain title companies to collect and report information about certain residential sales in the Borough of Manhattan in New York, N.Y. and Miami-Dade County, Florida, effective March 1, 2016 through August 27, 2016. That being said, only one of the GTOs issued affects transactions in Miami-Dade County, specifically all-cash real estate purchases in excess of $1 Million with certain stipulations. Furthermore the GTO is quite narrow and is not as broad as a lot of reports have stated or implied.

DOWNLOADS RELATING TO GTO

• FinCen GTO – Actual document received by title companies that are required to comply with the GTO
• FinCEN Frequently Asked Questions Regarding GTO
• American Land Title Association (“ALTA”) Fact Sheet for FinCEN Geographic Targeting Orders for Manhattan, NY and Miami-Dade County, FL
• FinCEN Press Release Regarding GTO
• Supporting FinCEN GTO Affidavit

TRANSACTIONS AFFECTED IN MIAMI-DADE COUNTY

Transactions that are affected by the GTO in Miami-Dade County are those in respect to certain real property purchases which meet ALL of the following parameters:

1. Sale of residential property located in Miami-Dade County, Florida;
2. Sale completed on or after March 1, through August 27, 2016 (“Order Period”);
3. Sales price exceeds $1 million;
4. The buyer is a legal entity, e.g., limited liability company (LLC), corporation, partnership,
   or similar business entity, but not a trust whether formed under the laws of a state or of the United State or a foreign jurisdiction;
5. Purchase is made without a bank loan or other similar form of external financing
   (financing by a financial institution that is required to have an anti-money laundering
   policy); and
6. Purchase price is paid, in whole or in part, with cash, cashier check, certified check,
   traveler’s check, or money order in any form. This does NOT include a sale where the purchase price is paid entirely by a wire transfer or personal or business check. However, a FinCEN spokesperson told the Real Deal last month that if it becomes apparent that buyers are using wire transfers to avoid the new regulations, the agency will “adapt in the future accordingly.”

WHO IS SUBJECT TO THE GTO?

Only the specific title insurance companies that received the GTO from FinCEN, including any subsidiaries or agents of the title insurance company, are subject to the requirements of the GTO.
Although the list of title companies affected by the GTO is not public knowledge, I recommend to buyers who fall into an “affected transaction,” that they ask the title company handling their transaction if they have received the GTO. If title companies are actually allowed to divulge the information to a potential buyer is unbeknownst to me at this time.

FAILURE OR INABILITY TO COMPLY WITH GTO

If title companies who were specifically issued the GTO fail to comply and violate the GTO, the company may be subject to criminal and civil penalties, which can be as severe as 10 years in prison AND up to a $500,000 fine.

LEGAL PERSPECTIVE

The legal purpose of the GTO is to mitigate potential money laundering in luxury real estate in Miami. Money laundering, which is defined by ALTA as the process of disguising financial assets produced through illegal activity, allows the monetary proceeds derived from criminal activity to transform into funds with an apparently legal source.

We spoke to Mark Meland, co-founding and managing partner of Meland, Russin & Budwick, P.A. in Downtown Miami and an accomplished real estate attorney in Florida with a diverse client base representing financial institutions, high-net-worth private investors, lenders and prominent real estate developers, to discuss his opinion of the GTO. Meland agrees with me that, although we understand that the purpose of the GTO is to prevent money laundering, this could negatively affect law-abiding “good” buyers. In fact, many buyers of luxury real estate in Miami are not hiding their identity for purposes of laundering money or trying to cover illegal activity. “Many buyers have legitimate reasons for not publicly disclosing the principals’ identities,” said Meland. “These include celebrities, athletes, business executives and other public figures who do not wish the general public to know the locations of their private homes.”

In fact, one of my high-net-worth clients from South America, who is represented by Meland, only hides his identity from the public for fear of people in his home country knowing how much money he is worth. The GTO is terrifying to a lot of legitimate, law-abiding buyers who come from countries where kidnapping for money is a frequent occurrence. Is it worth jeopardizing people’s safety? Also, won’t this cause high-quality foreign buyers to not buy here for reasonable fears such as these?

If you, or someone you know, are interested in purchasing real estate in Miami, please contact your trusted and knowledgeable real estate broker, Michael Light of Miami Luxury Homes. You may reach me directly at my office at (305) 350-9842, on my cell at (786) 566-1700 or via email at michael@miamiluxuryhomes.com.

Disclaimer: The information herein is meant for informative purposes only and should not be relied upon. I am not an attorney, and the information in this article should not be used as legal advice.