U.S. Government Accountability Office Issues Report on Money Laundering Report Mechanism
Eric House - Sep 29 2020The U.S. Government Accountability Office has conducted a review of the Financial Crimes Enforcement Network (FinCEN)’s “geographic targeting order” (GTO), a mechanism used to collect information on certain U.S. real estate transactions in an effort to identify potential money laundering.
The U.S. Government Accountability Office has conducted a review of the Financial Crimes Enforcement Network (FinCEN)’s “geographic targeting order” (GTO), a mechanism used to collect information on certain U.S. real estate transactions in an effort to identify potential money laundering.
Money laundering through real estate transactions has risen to be a top concern in in the industry alongside wire fraud. In 2017, FinCEN released an advisory on the potential risks of money laundering that highlights criminals using shell companies to launder money in real estate transactions involving luxury properties. FinCEN also released a geographic targeting order (GTO) which collects information on certain U.S. real estate transactions and imposes reporting requirements on title insurers. According to FinCEN, these requirements “cover a large number of transactions without unnecessary complexity” and that reports “yielded information useful to law enforcement investigations.”
Due to concerns regarding the potential for bad actors to possibly exploit any regulatory gaps to launder money through the real estate market, the U.S. Government Accountability Office reviewed FinCEN’s GTO. Among its recommendations, which were concurred by FinCEN, are that the Associate Director of FinCEN’s Global Investigations Division should “provide additional direction for self-initiated GTOs, including how the agency will plan to (1) oversee covered businesses, (2) inform and obtain feedback from appropriate law enforcement agencies, and (3) evaluate the GTOs to determine the appropriate course of action.”