New Disclosure Targets Financial Crimes and Fraud in Real Estate Transactions

We just learned about a new mandatory disclosure that affects some residential real estate transactions in the state of Colorado. It goes into effect tomorrow, May 24, 2023. The purpose of the new disclosure is to help combat the scams and fraud that are increasing in our industry.

The Federal Financial Crimes Enforcement Network (FinCEN) has issued a Geographic Targeting Order (GTO), requiring all underwriters and licensed title agents to report additional information about buyers before closing qualifying transactions.

Impacted transactions include residential transactions that are purchased with cash or financed by “hard money” loans from private investors, or if the buyer is a business entity. Only purchases over $300,000 are affected.

The rule applies to purchases within all the Denver metro counties plus Clear Creek, Elbert, El Paso, Fremont, Mesa, Pitkin, Pueblo and Summit counties.

For transactions that fall under these criteria, the buyer will need to provide specific details about the real estate transaction, the source of their purchase funds, and information about individuals with a 25% or more beneficial interest in the buying entity. This includes contact information, Social Security numbers, and copies of ID cards.

Title companies handling such transactions will reach out to agents and their buyers directly and ask for this information on a new form which will need to be returned to the title company prior to closing.