Recently, FinCEN issued a Geographic Targeting Order (GTO) requiring certain title agencies in New York and Miami to identify cash buyers of real estate. GTOs are a tool utilized by FinCEN to compel certain additional record-keeping and reporting requirements on financial institutions, non-financial trades, or businesses within a specific geographic area. At first glance, additional “paperwork” for real estate title companies would appear to be a non-story for the bitcoin community. However, as with virtually all FinCEN announcements or transcripts, there are usually several key takeaways for all industries, including bitcoin MSBs. So let’s review.
First, the recent GTO is yet another indication of FinCEN’s aggressive and targeted efforts to fight money laundering under Director Jennifer Shasky Calvery. In fact, FinCEN has issued a slew of GTOs over the course of the past two years, including orders covering the Texas and California borders; the Fashion District of Los Angeles (no, we’re not kidding); exporters of electronics in South Florida; and, check cashers in South Florida.
As the above list of diverse industries and geographies might illustrate, FinCEN GTOs are issued in response to timely trends observed via SAR filings, input from law enforcement, and information sharing with financial services entities. The level of specificity of these GTOs speaks to the granularity of FinCEN’s data and analytical capabilities. The possibility of a GTO aimed at bitcoin MSBs is certainly not out of the question, though there’s nothing to indicate any such actions are in the works at this time.
Moreover, Director Calvery’s recent comments about the lower level of money laundering risk posed by bitcoin suggests the chances of such an action may be even more remote. Nonetheless, bitcoin MSBs must remain vigilant and aware that FinCEN requirements could be bolstered at a moment’s notice. We suspect the real estate title industry never imagined such an order from FinCEN.
Second, the recent GTO focuses on “all cash” purchases. Rightfully, FinCEN and law enforcement continue to maintain that cash is the money laundering vehicle of choice among illicit actors. (Fun fact: FinCEN loves to use the term “illicit actors”.) Understand that if your bitcoin MSB accepts cash, you’ll be held to a higher standard in terms of KYC, customer due diligence, and information gathering requirements. No matter how specific the GTO, FinCEN will always reserve the highest risk and therefore strongest expectations for cash-based products and services.
Third, FinCEN continues to enhance and strengthen its reach outside of traditional banking. In this case, extending its purview into the real estate title industry. Since her confirmation in 2012, Director Calvery continues to execute on her priority of strengthening standards and enforcement of non-bank entities subject to the Bank Secrecy Act. Make no mistake, FinCEN will not retreat from promoting higher standards and accountability among non-bank entities. Bitcoin MSBs should continuously review and ensure their AML program and compliance efforts meet or exceed regulatory requirements.