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A guide to those being naughty: Chapter 1 “Where not to hide your money from the government regulato


If you are looking to hide some hefty ill-gotten gains…or even gains not so nefariously obtained, then one thing to avoid is an all cash purchase of high end residential real estate. You especially don’t want to do this in the following geographic areas:

  1. All boroughs of NYC

  2. Miami metro area

  3. Los Angeles

  4. San Francisco metro area

  5. San Diego

  6. San Antonio

These are all lovely places that undoubtedly have very nice high end residential real estate. Most of these locales are ridiculously expensive and seem well suited for use of your significant gains. Why would you want to avoid these places like the plague? Simple: our friends at the Treasury’s Financial Crimes Enforcement Network (FINCEN) are targeting title companies in these areas to collect and disclose information on persons behind all cash high end residential real estate purchases. Seems FINCEN has caught wind that folks looking to launder money or skirt the Bank Secrecy Act have been buying up expensive homes. If I had a few million in cash stored away under my mattress, then I too would probably buy a nice fancy house where I had more bedrooms with more mattresses in which to store my cash.

If you happen to work at one of the selected title companies that FINCEN has selected for a “Geographic Targeting Order” (GTO), then your job just got more complicated. You now have to file yet another IRS form and also collect information on the identity of the buyer’s representative, the buyer, and any beneficial owner of the purchased real estate. Before you get yourself into an uproar, these GTO’s are specifically targeted to corporations, LLC, partnerships or other similar business entities, either domestic or foreign, that purchased the aforementioned residential real estate. It is easy to understand why FINCEN is bothered by this type of transaction. A drug king-pin or organized crime boss or the dreaded terrorist is likely wise enough (or is surrounded by wise advisors) to not purchase real estate in his or her name.

He or she would likely use the following steps:

  1. Create a single member LLC with an unsuspecting name like “ABC Laundry” with the king-pin, boss, or terrorist as the sole member. I recognize this is simplistic, as I suspect that yet again the king-pin, boss, or terrorist is wise enough to not have his or her name that closely associated with the LLC.

  2. Have LLC purchase high end residential real estate.

  3. Use all cash for purchase.

  4. Hang your Picasso paintings on the wall, set-up that home theater, stock your closet with your custom tailored suits and Gucci shoes.

  5. Sit back and relax on your Italian leather sofa recognizing you just successfully laundered millions of dollars and thumbed your nose at anti-money laundering laws and pulled a fast one on the government.

But with the new GTO’s, steps 1-4 are still possible. Step 5 loses some of its charm and now means you can sit on that sofa but without the air of narcissism but instead sprinkled with a flinch every time the doorbell rings.

For FINCEN’s press release: https://www.fincen.gov/news_room/nr/pdf/20160727.pdf