Real estate anti-fraud measure imposed in New York City

On Behalf of | Apr 7, 2017 | Firm News, Fraud

Property values in New York City are among the highest in the country. While this is good news for sellers, buyers are often concerned with how the property’s price tag will affect their property tax rate. Do these factors encourage crime?

Nearly all real estate transactions are done legitimately and in accordance with the law. However, property crimes are among the most serious criminal activities and are quick to earn attention from federal prosecutors. Litigation is reactionary, but the United States government took a proactive step recently to prevent crimes of fraud.

In February, the Financial Crimes Enforcement Network (FinCEN), a bureau of the Department of the Treasury, renewed Geographic Targeting Orders (GTO) that mandate real estate title insurance companies identify the owners of shell corporations that pay cash for property in New York City.

What is the title insurers’ role?

Title insurance companies protect buyers from any existing penalties on a property such as tax liens or defects. Buyers should take careful steps before purchasing property to ensure that the title is not subject to penalties. Title insurance is often required to make a transaction, but improper safeguards encourage shady deals, as FinCEN is attempting to prevent.

Why do buyers use shell corporations?

Shell corporations are popular among entrepreneurs and startup groups as a way to finance a business without significant operation or assets. However, they can also be used for illegal activities such as money laundering and tax evasion. By paying cash for real estate transactions, shell companies can avoid tax obligations and other regulations.

Due to its structure, the individual operators behind shell corporations can be kept secret. FinCEN hopes that by forcing title insurance companies to identify a shell company’s owners, they can reduce fraud, tax evasion and property crime.

Some people may commit fraud unknowingly

Anyone can commit fraud whether it is realized or not. U.S. Code is complex, which can make it difficult for individuals and organizations to comply with the law. The penalties for fraud are serious and can result in felony charges. While FinCEN’s order targets illegitimate business owners or real estate agents, those same groups are also the most likely to be victimized by fraud.

A criminal defense law firm that specializes in white-collar crime and federal charges can provide business owners and entrepreneurs with fraud defense strategies.