Affluent condominium investors will soon have a difficult time buying them anonymously in all-cash purchases -- especially if they are buying condos in New York City and Miami. Federal authorities said that they plan to uncover the identities of people buying luxury properties for cash in Miami-Dade County and New York City. The crackdown is part of a massive anti-money laundering project being carried out by the federal government.
A Common Tactic Used by the Super Wealthy and Super Unscrupulous
The federal government believes that unscrupulous high net worth individuals are using shell companies to buy condos in the United States as a scheme to disguise their dirty money. The Financial Crimes Enforcement Network, part of the U.S. Treasury Department, is leading the enforcement effort to investigate the problem.
Financial Crimes Enforcement Network Director Jennifer Shasky Calvery said, "We are seeking to understand the risk that corrupt foreign officials, or transnational criminals, may be using premium U.S. real estate to safely and secretly invest millions in dirty money." Calvery also said that the standard mortgage market has become more transparent due to new federal rules, making money laundering and fraud more difficult to achieve, but cash purchases still need to be targeted as a potential area for unlawful activity.
As part of the effort, from March to August 2016, title insurance companies must demand the identities of cash buyers of condos, and provide those identities to the federal government. The names will not be publicly released, but will be examined by federal officials. The rule will apply to buyers who make cash purchases of $3 million-plus homes in New York City and $1 million-plus in Miami-Dade County.
Real Estate Industry Could Lose This Income Stream
The real estate industry will no doubt be sorry to hear about this new development because numerous real estate agents and real estate firms have profited from a secret network of cash-only buyers. According to one assistant law professor at the University of Pittsburg School of Law, Jessie Allen, "Purchase of luxury real estate in cash seems to be the new '$5 million mattress' ... the obvious concern here is money laundering and are people using luxury real estate to avoid the reporting required when a large cash deposit is made."
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