Having trouble reading this email? View it in your browser

January 19, 2016

White Collar Defense and Investigations

FinCEN Continues Emphasis on “” Sources – This Time, Secret Real Estate Buyers

By: Reid J. Schar, Wade A. Thomson, and Sarah F. Weiss

On January 13, the Financial Crimes Enforcement Network (“FinCEN”), a unit of the U.S. Treasury Department, announced new rules targeting secret buyers of high­end real estate properties. From March 1 through August 27 of this year, FinCEN is requiring U.S. title companies to report the identity of the beneficial owners of Limited Liability Companies (“LLCs”) and other shell companies who exclusively use to purchase high­ end real estate in two locations – Manhattan and Miami.

Historically, certain high net worth individuals have used LLCs and other structures to purchase expensive real estate in cash, thereby concealing their identities and avoiding the need to disclose background information to in mortgage applications. FinCEN believes that certain of the individuals using front­companies to make all­cash purchases of high­end real estate could be foreign officials or foreign criminals who are secretly investing criminal proceeds ­­­ “dirty money” ­­­ in United States real estate to move the ill­gotten gains out of their home countries.

FinCEN intends to submit the identities of those using front­companies to purchase real estate in Manhattan (over $3 million in cash only) and Miami (over $1 million in cash only) to a law enforcement database in an effort to investigate suspicious purchases. If FinCEN’s review of the Manhattan and Miami front­company purchases uncovers useful law enforcement leads, FinCEN plans to make the reporting requirements permanent and to apply the requirements nationwide. Publicly reported rumors suggest that Los Angeles and Houston may be the next cities in which title insurance companies will be required to report purchasers using front­companies to engage in cash real estate transactions. FinCEN accomplishes its city specific requirements through what are known as Geographic Targeting Orders (“GTOs”). As for the title insurance companies involved in the real estate transactions, they face criminal and civil penalties if they do not comply with the GTOs – which require submitting a form to FinCEN within 30 days of closing in a qualifying real estate transaction – or if they report false information about purchasers to FinCEN.

The new GTOs are the latest in a recent string of efforts by FinCEN to combat money laundering by targeting the means and methods often used to conceal the true source of criminal proceeds. For example, FinCEN increased its scrutiny on casinos in the last two years, investigating and fining several casinos. FinCEN has prioritized investigating casinos for willful violations of the Secrecy Act and failure to know the source of customer funds. FinCEN has been particularly critical of the failure to develop what it considers sufficient anti­ money laundering (AML) compliance programs and failing to report suspicious activity.

FinCEN’s latest efforts demonstrate that FinCEN is continuing its trend of aggressively reviewing source of cash funds and is focused on industries beyond typical financial institutions. FinCEN’s latest rules start March 1 in two real estate markets. There is almost certainly more to come.

Reid Schar is a partner and a Co­Chair of Jenner & Block’s White Collar Defense & Investigations Practice Group; Wade Thomson is a partner in the Complex Commercial Litigation Practice Group and works closely with the White Collar Defense & Investigations Practice Group; Sarah Weiss is an associate and a member of the White Collar Defense & Investigations Practice Group. The authors practice out of the Chicago office of Jenner & Block and have represented companies in FinCEN and AML investigations. Contact Us Reid Schar, Partner, Jenner & Block

Phone: 312 923­2629 Email: [email protected] Download V­Card

Practice Groups: Complex Commercial Litigation, Litigation, White Collar Defense and Investigations

Wade Thomson, Partner, Jenner & Block

Phone: 312 840­8613 Email: [email protected] Download V­Card

Practice Groups: Complex Commercial Litigation, Litigation, Media and First Amendment, White Collar Defense and Investigations

Sarah Weiss, Associate, Jenner & Block

Phone: 312 840­7597 Email: [email protected] Download V­Card

Practice Groups: White Collar Defense and Investigations, Health Care

Unsubscribe | Manage preferences | Forward to a Friend © Copyright 2016 Jenner & Block LLP, 353 North Clark Street, Chicago, IL 60654, 312 222­9350. Jenner & Block is an Illinois Limited Liability Partnership including professional corporations. Under professional rules, this communication may be considered advertising material. The material contained in this document has been authored or gathered by Jenner & Block for informational purposes only. It is not intended to be and is not considered to be legal advice. Transmission is not intended to create and receipt does not establish an attorney­client relationship. Legal advice of any nature should be sought from legal counsel. Matters: To the extent this material or any attachment concerns tax matters, it is not intended or written to be used, and cannot be used by a taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer under law.