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Lawmakers call for investigation into all-cash deals

Posted by Editor on October 12, 2018
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Federal authorities have been investigating whether foreign buyers are using shell companies to buy luxury real estate in the U.S. to launder money. Lawmakers, however, are calling on the government to do more to determine the prevalence of such scams and find more ways to curtail it.

Sens. Chris Van Hollen, D-Maryland, and Sheldon Whitehouse, D-Rhode Island, are calling on the Government Accountability Office (GAO) to investigate the occurrence. The senators say they’re concerned that “transnational criminal organizations and other illicit actors” are taking advantage of gaps in the government’s regulatory and law enforcement process with real estate transactions.

“The widespread money laundering risks posed by real estate transactions conducted without any financing (i.e. “all-cash”) through the use of shell companies creates challenges for law enforcement and federal regulators seeking to safeguard the financial system from illicit use,” the senators wrote to the GAO.

Real estate professionals should be aware of the growing risks of money laundering in real estate and how to report suspicious activities. The National Association of Realtors®’ offers “Anti-Money Laundering Guidelines for Real Estate Professionals” on its website.

An initial investigation from the Treasury Department’s Financial Crimes Enforcement Network found cases of unknown buyers using shell companies to purchase luxury real estate in Manhattan and Miami-Dade County. They found that more than 25 percent of transactions covered in an initial inquiry involved a “beneficial owner” who was part of a report flagged for possible criminal activity. FinCEN then expanded its probe – and also included suspicious wire transfers – to all of New York City, Los Angeles, San Francisco and several other cities.

The senators are calling for a broader investigation into potential cases of money laundering in the luxury housing market and how FinCEN and other agencies can address it more aggressively.

Source: “Senate Democrats Call for Federal Investigation Into Money Laundering in Luxury Real Estate,” HousingWire (Oct. 4, 2018) and “Senators Seek Probe of Money Laundering in Real Estate,” The Wall Street Journal (Oct. 3, 2018) [Log-in required.]

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