WASHINGTON—The Treasury Department’s Financial Crimes Enforcement Network has been looking into whether foreign buyers are using shell companies to buy luxury U.S. real estate in order to launder money for almost three years, but two Democratic senators want the government to do more to figure out how much criminal activity is prevalent in such deals.
The initial FinCEN investigation delved into unknown buyers using shell companies to buy high-end real estate in Manhattan and Miami-Dade County in Florida, because the government was “concerned about illicit money” being used in the deals, Housingwire reported.
The results of that initial investigation showed more than 25% of transactions covered in the initial inquiry involved a “beneficial owner” who is also the subject of a “suspicious activity report,” which is an indication of possible criminal activity.
The initial investigation also led FinCEN to expand the probe to include all of New York City, Los Angeles, San Francisco and several other areas. The investigation was later expanded again to include wire transfers, Housingwire explained.
The expanded investigation required title insurance companies in the designated areas to identify the actual person behind shell companies used to pay all cash for high-end residential real estate.
Senators Want to Know More
But two senators want more done.
Sens. Chris Van Hollen (D-MD) and Sheldon Whitehouse (D-RI) have asked the Government Accountability Office to also look into whether money laundering is taking place in U.S. real estate, Housingwire stated.
In a letter sent to the GAO, Van Hollen and Whitehouse said that they are concerned that “transnational criminal organizations and other illicit actors” may be taking advantage of “gaps” in the government’s regulatory and law enforcement process surrounding real estate dealings, Housingwire reported.
“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 in their letter to the GAO.
Money Laundering?
The senators said they are hopeful that a GAO investigation will help determine whether violations of the Bank Secrecy Act or federal anti-money laundering laws are taking place.
“FinCEN has indicated that these GTOs (geographic targeting orders, the measures FinCEN has taken to this point), which have been renewed and extended several times, are temporary measures intended to help the agency, ‘better understand the vulnerabilities presented by the use of shell companies to engage in all-cash residential real estate transactions,’” the senators stated.