Senate Bill Would Force Title Insurance Companies To Report Identities Of Those Behind LLCs In High-Priced RE Deals
The days of property investors shielding their identities behind a limited liability corporation structure could come to an end with a newly introduced U.S. Senate bill that could become law. The bill applies to "high-value" transactions.
In early August, Sen. Lindsey Graham and a number of bipartisan senators introduced S. 3366, "The Defending American Security from Kremlin Aggression Act," whose title makes it clear that it is designed to counter the Russian government in its efforts to destabilize the United States.
The bill has a sizable number of provisions, including a ban on Russian state banks, sanctions on investment in Russian oil and gas companies, and sanctions on Russians suspected of cyberattacks against the United States.
Also tucked in the bill is language that would require title insurance companies to disclose who is behind LLCs in major real estate deals.
The bill says: "The Secretary [of the Treasury] shall issue an order... requiring a domestic title insurance company to obtain, maintain, and report to the Secretary information on the beneficial owners of entities that purchase residential real estate in high-value transactions in which the domestic title insurance company is involved."
What is a "high-value transaction"? Whatever the regulations promulgated by the Treasury Department say it is, according to the bill.
"This is definitely a serious effort,” David Murray, a former director of the Treasury Department’s Office of Illicit Finance, told the Real Deal. “The fact they managed to get this in, I think it’s a pretty big deal.”
The bill would make permanent — and much wider — a program implemented last year by the Treasury Department's Financial Crimes Enforcement Network that requires title insurers to disclose owners of LLCs that pay cash for real estate.
The thrust of that program is to prevent money laundering, and it currently applies in New York, Miami, San Francisco, Los Angeles, San Antonio and Honolulu, with high-value meaning as little as $1M in some places and $3M in others.
"Many real estate transactions involve high-value assets, opaque entities and processes that can limit transparency because of their complexity and diversity,” the Financial Crimes Enforcement Network said in an advisory last year. "For these reasons and others, drug traffickers, corrupt officials and other criminals can and have used real estate to conceal the existence and origins of their illicit funds."