US targets ‘dirty money’ hidden in luxury real estate

Investigators will identify and track secret buyers of high-end properties to crack down on a popular method of money laundering.

Manhattan skyline.

The United States will begin identifying and tracking secret buyers of high-end real estate, in order to crack down on what US officials fear has become a popular method of money laundering.

“We are concerned about the possibility that dirty money is being put into luxury real estate,” Jennifer Shasky Calvary, the director of the US Treasury Department’s Financial Crimes Enforcement Network, told The New York Times in a Jan. 13 article outlining the new initiative.

The program will focus on New York City and Miami, two of the country’s top luxury housing markets, and will require real estate companies to disclose the names of the flesh-and-blood individuals behind multimillion dollar purchases that are often paid in cash using shell companies.

In 2014, ICIJ reported on the emergence of Manhattan real estate as a magnet for shadowy offshore wealth. The story revealed a colorful cast of international buyers, including a former president of Taiwan who was convicted of corruption and a Russian fertilizer tycoon whose ex-wife claimed he was hiding assets in a divorce, plowing huge sums into luxury penthouses and swanky apartments in Manhattan.

These purchases were often hidden behind a tangle of shell companies and other offshore entities that obscured the true identities of the buyers, reported ICIJ, in partnership with New York magazine and the Organized Crime and Corruption Reporting Project (OCCRP).

In 2015, the New York Times published a multipart series probing this trend, revealing that several businessmen and politicians who were under criminal scrutiny in their native countries owned apartments under the same roof in Manhattan’s Time Warner Center. 

More than half of Manhattan real estate sales over $5 million dollars in 2014 were to shell companies, the Times reported.

The Treasury Department’s initiative will work in partnership with a new unit in the Federal Bureau of Investigation that is focused on money laundering, allowing the FBI to pursue leads that had previously been obstructed by the anonymity surrounding shell companies. Law enforcement officials will also pay closer attention to intermediaries in the world of offshore finance who enable questionable real estate transactions.

Patrick Fallon, a senior FBI official, told the Times that targets were “the bankers, they’re the accountants, lawyers, folks who are setting up L.L.C.s, they are setting up foundations, folks who are setting up nonprofits, real estate investment trusts, etc.”

“We’re going after the facilitators of the money laundering,” Fallon said.

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