The U.S. Treasury is now looking into luxury real estate and properties, in an effort to find and track secretive buyers. The move is due to the growing concern regarding illicit money used to purchase these high-end properties.
It was on Wednesday when the Financial Crimes Enforcement Network (FinCEN) issued Geographic Targeting Orders, which are meant to "temporarily require" U.S. title insurance companies to reveal the real people who paid "all cash" for luxury residential real estate, which are often concealed.
The plan will begin in two of the country's major cities associated with global wealth: New York City's Manhattan, and Miami-Dade County in Florida.
"We are seeking to understand the risk that corrupt foreign officials, or transnational criminals, may be using premium U.S. real estate to secretly invest millions in dirty money," FinCEN director Jennifer Shasky Calvery said.
"Over the years, our rules have evolved to make the standard mortgage market more transparent and less hospitable to fraud and money laundering. But cash purchases present a more complex gap that we seek to address. These GTOs will produce valuable data that will assist in law enforcement and inform our broader efforts to combat money laundering in the real estate sector," Calvery continued.
The move will definitely be keeping the real estate industry on their toes. The New York Times reports:
"It is the first time the federal government has required real estate companies to disclose names behind cash transactions, and it is likely to send shudders through the real estate industry, which has benefited enormously in recent years from a building boom increasingly dependent on wealthy, secretive buyers."
As it turns out, it's only the tip of the iceberg. The initiative is just a small part of a much bigger federal effort to uncover money laundering in real estate.
Treasury and federal law enforcement officials have said that they are currently in the works to gather more resources to investigate more luxury real estate sales that involve shell companies, such as limited liability companies (LLCs), partnerships, among other entities.
Future investigations will also put more focus on identifying professionals that aid secretive buyers in money laundering. This includes real estate agents, lawyers, bankers, and LLC formation agents.
