FinCEN Addresses GTO Questions

The Treasury Department’s Financial Crimes Enforcement Network (FinCEN) verbally provided on Sept. 7 answers to frequently asked questions by title companies on compliance with the Geographic Targeting Order (GTO). These questions were selected from those asked during webinars hosted by ALTA and the California, New York and Texas land title associations. For questions about specific transactions, ALTA and FinCEN recommend calling the FinCEN Resource Center at 800-767-2825. Most transaction specific questions are answered within one to two business days.

Q – Multiple buyers. If a purchase is being made by an individual buyer and a corporate entity as tenants in common and would otherwise meet the GTO thresholds is it a covered transaction? Does this answer change if the legal entities portion of the equity in the real estate is less than the reporting threshold?

A – Yes it is a covered transaction. The GTO defines a covered transaction as one in which a legal entity is involved in any manner as a purchaser or real estate in a covered location at or above the covered price. This is true even if the legal entity will own a minority or de minimis stake in the property.

Q – Business Trusts. Is a business trust considered legal entities for purposes of the GTO?

A – No. All trusts, no matter the purpose, are outside the definition of a legal entity under the GTO. The type of trustee, individual or corporate, does not change this result.

Q - Refunded checks/deposits. If an entity pays their earnest money in a business check but this check is not deposited and later returned to the purchaser who then wires the entirety of the purchase price at closing is this a covered transaction?

A – Yes. If a one of the covered payment methods (checks, money orders, cash) is used as part of the transaction by any of the parties then it is covered by the GTO. This includes situations where those funds are later refunded and the entirety of the purchase price is wired.

Q - 1031 exchanges. Does the GTO cover residential properties that are obtained as part of a 1031?

A – Yes. The mere fact it’s a 1031 transaction does not impact the determination on whether a transaction is covered by the GTO.

Q – Vacant lots. Does the GTO cover the purchase of a vacant lot? What if it is going to be used in the construction of a home?

A – It depends. The answer hinges on whether the vacant land would be considered residential under the GTO definition. A good rule of thumb is to consider whether the sale would be covered by TILA or RESPA (requiring the issuance of TRID forms) if it was being purchased using a loan. As a reminder, if you have a question about a specific transaction, it is best to reach out to FinCEN directly for guidance.

Click here for more information about the GTOs.

If you have additional questions about FinCEN and the GTO, you may email Steve Gottheim, ALTA’s senior counsel.