US Real Estate Investments & Anonymous Entities Again in Spotlight for US Money Laundering!
February 1, 2016
On Thursday, January 14, 2016 we posted U.S FinCEN Will Track Secret Buyers of Luxury Real Estate in Manhattan and Miami where we discussed that the Financial Crimes Enforcement Network (FinCEN) on January 13, 2016 issued a Geographic Targeting Orders (GTO) that will temporarily require certain U.S. title insurance companies to identify the natural persons behind companies used to pay "all cash" for high-end residential real estate in the Borough of Manhattan in New York City, New York, and Miami-Dade County, Florida.
The initiative is part of a broader federal effort to increase the focus on money laundering in real estate. Treasury and federal law enforcement officials said they were putting greater resources into investigating luxury real estate sales that involve shell companies like limited liability companies, often known as L.L.C.s; partnerships; and other entities.
The Treasury’s program will affect billions of dollars in real estate transactions. In Manhattan, the initiative requires buyers in sales of more than $3 million to be reported; in Miami-Dade County, it requires reporting on sales of more than $1 million. In Manhattan, 1,045 residential sales cost more than $3 million in the second half of 2015, worth some $6.5 billion in aggregate, according to PropertyShark, a real estate data company.
With attention growing on the use of shell companies in high-end real estate, an activist organization released a report
Sunday January 31, 2016 that said several New York real estate lawyers had been caught on camera providing advice on how to move suspect money into the United States. This investigation was covered in the New York Times
and is the result of an undercover investigation carried out in 2014 by Global Witness, a nonprofit activist organization that has been pushing for stricter money-laundering rules.
We all know what it feels like to get ripped off or scammed. But we know less about the tools the criminals use to get away with their illicit activities. Global Witness has previously looked at a whole range of crimes
, and found they all had one thing in common - They were all carried out by anonymous company owners
, who are able to skirt U.S. laws and launder money through our financial system. If these sham companies did not exist, those crimes would be far harder to commit.
The key findings from the investigation are:
- Lawyers from 12 of the 13 firms we visited suggested using anonymous companies or trusts to hide the minister’s assets. All but one of these firms recommended using American companies.
- One of the lawyers was the President of the American Bar Association at the time.
- Several lawyers suggested using their law firms’ own bank accounts to help prevent U.S. banks realizing whose money it really was, or to have the lawyer act as a trustee of an offshore trust and use this position to open a bank account.
- While most of the lawyers asked for some information about the minister, and his source of funds, only one lawyer refused to provide assistance during the meeting itself.
Lawyers who were named in the report, or their representatives, told The Times that they took issue with Global Witness’s undercover methods.
This week, a bipartisan group of lawmakers is planning to introduce a bill in the House of Representatives to require more transparency into shell companies nationwide. And later this week, activists in London will hold what they are calling a Kleptocracy Tour, a bus ride past properties that they said had been associated with illicit money. They plan to hold a similar tour in New York in April.
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