U.S. Treasury takes aim at money laundering in the luxury-home market

In two of the nation’s priciest markets, U.S. title companies will soon have a new duty: ferreting out money laundering schemes involving luxury homes.

Beginning in March, the investigative wing of the U.S. Treasury Department will require title companies to report the names of the buyers in high-end deals in Manhattan and Miami when properties are purchased with cash through shell companies.

When loans are involved, mortgage originators, the banks and government-sponsored enterprises are already required to report suspicious activity, but anonymous buyers who purchase homes through dummy companies in all-cash deals have remained hidden from regulators.

Last month, the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) announced that it was targeting Manhattan and  Miami-Dade County, Florida, where wealthy foreign buyers regularly purchase luxury homes through shell companies. This is part of the government’s efforts to crackdown on flows of dirty money into real estate deals, some of which has been connected to drug trafficking and international terror groups.

The reporting requirement will end in six months, but could potentially be extended. The title industry has expressed mixed opinions about it.

“If I had to make a prediction, I would say it just won’t succeed in capturing these bad guys, and it will expire six months from now,” said Marc Israel, president of the Manhattan- based MiT National Land Services.

Israel said his company frequently handles transactions with clients who want to keep their names secret. These can be celebrities, and also foreigners.

“We see that a lot here in New York, as you can imagine, and in Miami,” Israel said. “There are very wealthy people from other countries, Latin America, other places, who literally have a price on their head because they come from countries where kidnapping is a very common crime. They don’t want to telegraph to the world who they are. I am not a celebrity and nobody is looking to kidnap me, but I think there are people who have legitimate reasons to want to stay under the radar.”

Israel doubted, however, that few legitimate buyers would walk away from a deal if they have to disclose their names.

The requirement will typically kick in if the property is sold at or above $3 million in Manhattan and $1 million in Miami. Steven Gottheim, senior counsel for the American Land Title Association, said not every all-cash sale will trigger the rule. Sales through wire transfers or with personal and business checks, for example, won’t have to be reported, he said. Only sales involving currency or a cashier’s check trigger the rule.

“Nobody really has an idea of how many transactions are going to be reportable because of these orders,” Gottheim said. “A safe guess is that it is not going to be a lot.”

He said the association’s members generally supports the spirit of the rule, but are not sure if it will work.

“Certainly no one in our industry wants to knowingly do work with  people who are attempting to launder money or evade those types of reporting requirements,” Gottheim said. “Time will tell if this reporting requirement is truly valuable to the Treasury Department in terms of rooting out money laundering.”

 

Direct link to article: http://www.scotsmanguide.com/News/2016/02/U-S–Treasury-takes-aim-at-money-laundering-in-the-luxury-home-market/

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