As a financial institution, we are being asked by audit to ensure adequate documentation of the impact of FinCEN’s geographic targeting orders in the BSA/AML risk assessment as many of the orders affect geographies the bank does business in.

I understand that covered businesses of the GTOs are title insurance companies who must report any transaction that involves each of the following elements:
1. The buyer must be a Legal Entity, defined under the GTO as a corporation, limited liability company, partnership or other similar business entity, whether formed under the laws of a state or of the United States or a foreign jurisdiction;
2. Residential real property located in the subject counties;
3. For a purchase price greater than or equal to $300,000 in each county;
4. Without a loan or similar form of external financing from a financial institution; and
5. Any portion of the purchase price is paid using currency, cashier’s check, certified check, traveler’s check, money order, personal/business check, bank check, funds transfer, or virtual currency.

Typical money laundering scheme: Bad actor A obtains a large sum of cash through illicit means, but wants to make the money appear legitimate. Bad Actor A may then have a chain of shell companies created to mask the trail back to his involvement and thus conceal the original source of the funds. One or more of these companies may be used to open a bank account, deposit the illicit funds, and make the real estate purchase. After a year or so, the house is sold, and the proceeds from the sale of the house are now legitimate.

Based on the above, what specific obligations does the FI have?

On the GTOs that were just renewed - absolutely nothing to do with a financial institution. It is a title company issue..

The auditors might want to actually read the orders. FinCEN even capitalized the impacted businesses for half blind auditors.

A. Business and Transactions Covered by This Order

1. For purposes of this Order, the “Covered Business” means TITLE INSURANCE COMPANY and any of its subsidiaries and agents.

I agree with Randy. But that said, a financial institution aware of the potential for using cash purchases of high-end residential real estate by shell entities might also see a pattern of transactions that might be related to such a purchase. For example, multiple purchases of cashier's checks in smaller amounts payable to the purchaser that are all presented for payment on the same date, all indorsed by a title company or settlement agent. That could be enough to file a SAR, but it isn't directly related to the GTOs.