By - Scott Aadal

NY Real Estate and Swiss Bank Accounts

The New York real estate industry has seen a flurry of changes recently. Electronic recording is now available in many counties. The CFPB has recently issued new closing requirements. Local municipalities seem to be trying to (in part) make up for shortfalls in their budgets by increasing fees associated with our industry on a regular basis. Are you comfortable yet? Well, there is yet another change looming on the horizon.

I remember not too long ago I read a headline in the news that said, “New York Real Estate: The New Swiss Bank Account” or something very similar to that.  The article alluded to the possibility that the financial proceeds from criminal activity may be put into real estate in New York and that the identity of the parties may be safer than putting it into the Swiss banking system.

Evidentially, someone in the government also read that report and decided to do something about it. The Financial Crimes Enforcement Network (“FinCEN”) has issued a Geographic Targeting Order (GTO). It is requiring title insurance companies to identify the beneficial owners of entities that acquire residential real property in New York County (Manhattan) and in Miami-Dade County. The targeted transactions are limited to “all cash” deals, meaning ones where there is no evidence of bank financing. The title companies are required to report this information to FinCEN for all transactions beginning March 1, 2016 and for a period of 180 days thereafter.

The law firm of Ropes & Gray recently reported:

Title insurance companies will be required to report to FinCEN the identities of the beneficial owner(s) or holder(s) of 25% or more of the direct or indirect equity or beneficial interests in the purchasing entity by filing a FinCEN Form 8300 within 30 days of closing a transaction. Generally, the Form 8300 requires that the following information be provided:1

  • Identity of the legal entity that is purchasing the residential property. Under the Orders, a legal entity is defined to include U.S. or foreign corporations, limited liability companies, partnerships or other similar business entities. The Orders do not expressly provide that a “legal entity” includes trusts, and the American Land Title Association (“ALTA”) has made a request to FinCEN to have trusts excluded from the reporting requirement.
  • Identity of the direct or indirect individual beneficial owner(s) or holder(s) of 25% or more of the direct or indirect equity or beneficial interests in the purchasing entity and a copy of their driver’s license, passport, or other similar identifying documentation.
  • Information about the key terms of the transaction, including closing date, total purchase price, form of consideration, and address of the property purchased.

To read the short release issued by the federal government, you can click here

Other entities have published articles with a little more history and insight.

For an article published by Cadwalader on this topic, you may click here;

For an article published by the National Law Review, you can click here: