If someone has the kind of wealth that allows them to legitimately pay cash for a $1 million-plus slice of real estate, moving home – notoriously one of life’s most stressful experiences – probably won’t cause them too many sleepless nights.
But a new move from the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) is set to raise the stress stakes for anyone seeking to launder money through cash purchases of property in New York or Florida.
FinCEN announced on 13 January that it would be introducing a 180-day trial of geographic targeting orders (GTOs) in Manhattan and Miami-Dade County, under which certain companies providing title insurance – protection against loss arising from a property ownership dispute – will need to identify the beneficial owner of a legal entity, like a shell company, when it buys certain high-value residential real estate without using a bank loan or other external finance.
The GTOs will affect properties with a purchase price of more than $3 million in Manhattan and $1 million in Miami-Dade. Given that the average home price in Manhattan was earlier this month reported as $1.9 million (it’s a rather more modest average of $274,900 for a single-family home in Miami-Dade), the bar seems to have been set pretty low.
FinCEN says the move, which will take effect from 1 March 2016, will help it 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’. Reports made by title insurance companies will be made available to law enforcement agencies.
The link between money laundering and property is nothing new, dating back long before the Financial Action Task Force published its report on Money Laundering & Terrorist Financing Through the Real Estate Sector in 2007.
Skip forward almost a decade and last year Transparency International was reporting that in the UK alone, property worth more than £180 million had been the subject of criminal investigation ‘as the suspected proceeds of corruption since 2004’, with more than three-quarters involving offshore corporate secrecy. Transparency International has also pointed out that anti money laundering regulation in the UK only requires due diligence checks on the seller, not the purchaser.
But with FinCEN seemingly determined to shed a robust light on opaque property purchasing vehicles, and UK Prime Minister David Cameron calling for increased transparency around property ownership by foreign companies, the world’s real estate hotspots could be on their way to becoming too hot to handle for would-be money launderers.
If you’re interested in learning with ICT, view all courses in AML, governance, risk and compliance and financial crime prevention here. You can find out more about all our courses at a free ICA Open Day/Roadshow, find out more here.
To stay updated on the latest developments in governance,risk and compliance, anti money laundering and financial crime prevention, please follow us on either LinkedIn, Facebook and Twitter where you are guaranteed to be notified when our next blog post goes live!