Best Place to Find Criminals? Anonymous Luxury Real Estate Buyers

By Christopher Coble, Esq. on January 19, 2016 | Last updated on March 21, 2019

The Department of the Treasury announced a new strategy in crime fighting: figure out who's behind companies used to pay "all cash" for high-end residential real estate. The Treasury's Financial Crimes Enforcement Network (FinCEN) said it will now require title insurance companies to identify buyers of luxury real estate in Manhattan, New York and Miami-Dade County, Florida.

Those of us who can't afford a mansion or high-rise condo can at least rest easy that we're not being added to a government watch list. (Yet.)

Dirty Laundry

The motivation behind uncovering anonymous real estate moguls goes like this: some criminals have large amounts of cash that they want to hide from the prying eyes of the IRS and law enforcement. They use this cash to purchase high-end real estate, and they use anonymous LLCs or other business structures to mask their connection to the purchase.

FinCEN hopes to combat this kind of money laundering by requiring certain title insurance companies to identify and report the true "beneficial owner" behind the legal entity involved in luxury real estate transactions in Manhattan and Miami-Dade.

Shell Game

The New York Times investigated the increased use of shell corporations to purchase multimillion-dollar homes, which were in essence "safe deposit boxes for ill-gotten gains." FinCEN director Jennifer Shasky Calvery told The Times, "We are concerned about the possibility that dirty money is being put into luxury real estate. We think some of the bigger risk is around the least transparent transactions."

So how far spread is the risk? The new initiative will require reporting of buyers of Manhattan properties valued at more than $3 million. For Miami-Dade County, sales of more than $1 million will require buyer reporting. This could affect anywhere from $6-$10 billion in real estate.

Whether this will have a chilling effect on high-end real estate market or let the feds freeze more criminal assets is anyone's guess.

Related Resources:

U.S. Will Track Secret Buyers of Luxury Real Estate (The New York Times)
Feds to Go After Lawyers Involved in Secretive Real Estate Deals (FindLaw's Strategist)
Drug Cartels and Organized Crime (FindLaw)
Fraud and Financial Crimes (FindLaw)