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Federal Register / Vol. 86, No. 233 / Wednesday, December 8, 2021 / Proposed Rules
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covered jurisdictions has expanded from two to nine metropolitan areas,54
and the orders now cover all U.S. title insurance companies operating in those areas. Subsequent GTO renewals have expanded the types of reportable allcash transactions to include those involving additional monetary instruments, such as personal and business checks, and those involving wire transfers.55 Over the course of the Real Estate GTO program, FinCEN
lowered the reporting transaction threshold from $3 million to $300,000
in order to better understand the risks of transactions in the non-luxury market.56 Lastly, real estate transactions involving purchases by publicly traded companies have been exempted.57
Evidence of money laundering via U.S. real estate transactions has increased over the last several decades, including during the period when the Real Estate GTO program has been in place. FinCEN understands from various law enforcement agencies that the Real Estate GTO data has been highly useful to the investigation of money laundering and financial crimes.
In evaluating reporting from the Real Estate GTOs issued since 2016, FinCEN
and law enforcement agencies believe that a substantial proportion of the reported transactions for the purchase of property involved a beneficial owner who was also the subject of a SAR.58 For example, a FinCEN advisory published in May 2017 stated that the proportion of such overlap was more than 30%.59
54 These areas are: 1 The Texas counties of Bexar includes San Antonio, Tarrant, and Dallas; 2 the Florida counties of Miami-Dade, Broward, and Palm Beach; 3 all New York City boroughs: Brooklyn, Queens, Bronx, Staten Island, and Manhattan; 4
the California counties of San Diego, Los Angeles, San Francisco, San Mateo, and Santa Clara; 5 the City and County of Honolulu in Hawaii; 6 the Nevada county of Clark includes Las Vegas; 7 the Washington county of King includes Seattle; 8
the Massachusetts counties of Suffolk and Middlesex includes Boston and Cambridge, respectively; and 9 the Illinois county of Cook includes Chicago.
55 This expansion of the GTOs to cover wire transfers was authorized by the Countering Americas Adversaries through Sanctions Act CAATSA, Public Law 11544 Aug. 2, 2017
codified at 31 U.S.C. 5326.
56 FinCEN found that money laundering risks existed at lower price thresholds, and thus the current GTO set a $300,000 threshold for all covered jurisdictions.
57 FinCEN concluded that the beneficial owners of real estate purchases by publicly traded companies are identifiable through other regulatory filings.
58 Notably, during the GTO program, independent of any GTO reports, SARs filed by banks related to suspected money laundering in residential real estate transactions increased.
59 See Advisory to Financial Institutions and Real Estate Firms and Professionals, Financial Crimes Enforcement Network, FIN2017A003, p. 5
Aug. 22, 2017.

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In other words, a significant number of the beneficial owners of the legal entities engaged in non-financed real estate purchases reported under the GTOs have a nexus to reported suspicious activity. The overlap between subjects of GTO reports and SARs suggests a link between all-cash purchases of residential real estate and individuals determined by financial institutions to have been engaged in suspicious activity. These connections between Real Estate GTO reports and other illicit activity have proven highly useful for FinCEN and law enforcement in identifying patterns of criminal activity and links between various illicit enterprises to support investigations.
Law enforcement input and actions further indicate that residential real estate presents significant money laundering risk. Federal and State law enforcement agencies have informed FinCEN that both SARs and GTO
reports related to real estate transactions have provided greater insight regarding assets held by persons of investigative interest, have resulted in asset forfeiture actions, and have helped generate leads and identify new subjects for investigation. Additionally, beyond the investigations that have been described above, a review of complaints, indictments, and prosecuted cases provides numerous examples of the linkages between real estate transactions and money laundering, as well as other illicit activities.60 Accordingly, the usefulness of the Real Estate GTO
reporting data to law enforcement suggests that a regulatory requirement to ensure consistent reporting on a nationwide basis would facilitate law enforcement and national security agency efforts to combat illicit activity in this sector.61
VI. Commercial Real Estate In contrast to FinCENs use of Real Estate GTOs to focus on all-cash transactions involving residential real estate, FinCEN decided at the time not to impose a reporting requirement on all cash commercial real estate transactions. The commercial real estate market is both more diverse and 60 See
Note 3 supra.
one study found that the Real Estate GTOs had the added ameliorative effect of decreasing anonymous capital flows into the U.S.
housing markets, thereby lessening the overall likelihood of BSA evasion via the real estate sector.
See Hundtofte, C. Sean and Rantala, Ville, Anonymous Capital Flows and U.S. Housing Markets, University of Miami Business School, p.
23 May 28, 2018; see also Nicholas Nehemas &
Rene Rodriguez, How dirty is Miami Real Estate?
Secret home deals dried up when feds starting watching, Miami Herald Jul. 18 2018, https
www.miamiherald.com/news/business/real-estatenews/article213797269.html.
61 Moreover,
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complicated than the residential real estate market and presents unique challenges to applying the same reporting requirements or methods as residential transactions. In commercial real estate, possible payments structures are more complex than in the residential real estate market. For example, while the line between financed and nonfinanced transactions is relatively welldefined in the residential real estate market, this is not necessarily the case with commercial real estate transactions. An entity may, for example, finance the purchase of a large commercial property via the issuance of bonds. It is unclear whether such a transaction would be viewed to be a cash transaction from the point of view of the entities required to report such a transaction. A commercial real estate transaction may also involve many transactions. In some cases, such as the development of a large commercial real estate project, there may be many transactions involved in the development and conveyance of a commercial real estate property over the course of months or years.
In part due to such added complexity and opacity, the risks and vulnerabilities associated with the residential real estate sector covered by the GTOs may be compounded in transactions involving commercial real estate, as there are additional types of purchasing options and financing arrangements available for parties seeking to build or acquire property worth up to hundreds of millions of dollars.62 Lawyers, accountants, and individuals in the private equity fieldsall positions with minimal to no AML/CFT obligations under the BSA
often facilitate commercial real estate transactions, working at different stages of the transaction and operating with differing amounts of beneficial ownership and financial information related to buyers and sellers.
Commercial real estate transactions also often involve purpose-built legal entities and indirect ownership chains as parties create tailored corporate entities to acquire or invest in a manner that limits their legal liability and financial exposure.63 The result is an opaque field full of diverse foreign and U.S.
domiciled legal entities associated with transactions worth hundreds of millions 62 COVID19 and the Future of Commercial Real Estate Finance, Congressional Research Service Oct. 19, 2020.
63 See generally Douglas E. Cornelius, Esq.
Goodwin Procter LLP, John P. ONeill, Esq. Holland & Knight, LLP, Closing Commercial Real Estate Transactions, May 9, 1995.

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