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FinCEN Real Estate Money Laundering Advisory
Monday, August 28, 2017 6:45 AM

The Treasury’s Financial Crimes Enforcement Network (FinCEN) released an advisory to provide information on money laundering risks associated with certain real estate transactions. According to FinCEN, real estate transactions involving luxury property purchased through shell companies—particularly when conducted with cash and no financing—can serve as an attractive way for criminals to launder illegal proceeds.

Shell companies are typically non-publicly traded corporations, limited liability companies (LLCs), or trusts that have no physical presence beyond a mailing address and generate little to no independent economic value.

Most shell companies are formed by individuals and businesses for legitimate purposes. Shell companies can often be formed without disclosing the individuals that ultimately own or control them and can be used to conduct financial transactions without disclosing their true beneficial owners’ involvement.

The bulletin also provides several high-profile examples from recent Department of Justice investigations:

  • One involved a Malaysian sovereign wealth fund. In 2016, the U.S. Department of Justice sought forfeiture of over $1 billion in assets—including luxury real estate—associated with funds stolen by corrupt foreign officials from the find. This included a hotel, 3 homes, a mansion, 2 apartments, a penthouse and a townhouse in California, New York and London; and 
  • A real estate agent who, in 2016, was jailed and ordered to pay $1,427,916 in restitution to victims, and forfeited $3,808,831 for his role as leader of both a large-scale bank fraud conspiracy and a separate money laundering conspiracy. He used straw buyers and altered records and documents to purchase real estate with cash throughout Northern California, which he then resold at significant financial gain.

In conjunction with the bulletin, FinCEN issued revised Geographic Targeting Orders (GTOs) that require U.S. title insurance companies to identify the natural persons behind shell companies used to pay for high-end residential real estate in seven metropolitan areas in Florida, Texas, New York, California, and Hawaii.     

Source: CUNA News