The federal government is tightening regulation around buying homes in three Bay Area counties in order to prevent individuals from hiding their identities from law enforcement by using a shell company and by paying all cash.

These strict regulations around home purchases are a part of a program designed by the Treasury Department's Financial Crimes Enforcement Network,  to hunt down tax evaders, drug dealers and other criminals who try to hide cash (18 U.S. Code § 1956 - Laundering of monetary instruments) by purchasing homes through shell companies without a mortgage, thereby getting around the banking system's security measures and rules against money laundering.

Under the program created, title insurance companies have to identify any customer who owns at least 25 percent of a legal entity- such as a limited liability company or corporation- that purchase a home for at least $300,000 in one of the 22 counties nationwide, including the three Bay Area counties: San Francisco, San Mateo and Santa Clara.

Homes are purchased through LLCs legitimately for anonymity and estate-planning reasons.  Yet, people who are implicated or suspected of a crime, such as foreign corruption, fraud or narcotics sale sometimes use these LLC's to purchase homes.

The federal government is not required to announce changes to the program. They issued a confidential order to title companies that dropped the purchase price threshold to $300,000 nationwide.

Some are worried that the order will drive buyers out of the Bay Area real estate market.

One of the flaws with this legislation is that People who want to launder money through purchasing homes can simply purchase the home in a county or through a structure not covered by the order or without title insurance.