Pricing exceptions are widespread in mortgage — and so are the regulatory risks

Read Now
InvestmentsReal Estate

U.S. to require secret buyers of high-end real estate to reveal identities

Feds will now begin tracking previously undisclosed cash buyers

Aiming to pull back the curtain on the practice of secret buyers using shell companies to funnel cash into luxury real estate, the U.S. government will now require real estate companies to disclose the names of all-cash buyers on high-end properties, The New York Times reported Wednesday.

According to The New York Times report, the Treasury Department is “concerned about illicit money” being used to buy luxury real estate, and will now begin identifying and tracking the previously unknown buyers who used shell companies to hide their identities.

The report states that the effort will focus initially on sales in Manhattan and Miami-Dade County, two locations where international cash buyers are prevalent.

From The New York Times:

The initiative will start in two of the nation’s major destinations for global wealth: Manhattan and Miami-Dade County. It will shine a light on the darkest corner of the real estate market: all-cash purchases made by shell companies that often shield purchasers’ identities.

It is the first time the federal government has required real estate companies to disclose names behind all-cash transactions, and it is likely to send shudders through the real estate industry, which has benefited enormously in recent years from a building boom increasingly dependent on wealthy, secretive buyers.

The initiative is part of a broader federal effort to increase the focus on money laundering in real estate. Treasury and federal law enforcement officials said they were putting greater resources into investigating luxury real estate sales that involve shell companies like limited liability companies, often known as L.L.C.s; partnerships; and other entities.

Over the last several months, the Times has published multiple pieces on what it calls the “towers of secrecy,” where cash buyers use shell companies to, in some cases, stash money obtained through potentially illicit means.

According to Wednesday’s article, the Treasury cited the Times reporting as one of the reasons for this move.

Again from the Times:

A top Treasury official, Jennifer Shasky Calvery, said her agency had seen instances in which multimillion-dollar homes were being used as safe deposit boxes for ill-gotten gains, in transactions made more opaque by the use of anonymous shell companies.

“We are concerned about the possibility that dirty money is being put into luxury real estate,” said Ms. Calvery, the director of the Financial Crimes Enforcement Network, the Treasury unit running the initiative. “We think some of the bigger risk is around the least transparent transactions.”

For more on the “towers of secrecy” and the government’s response to it, click here.

“We are seeking to understand the risk that corrupt foreign officials, or transnational criminals, may be using premium U.S. real estate to secretly invest millions in dirty money,” Shasky Calvery said Wednesday in a separate statement.

“Over the years, our rules have evolved to make the standard mortgage market more transparent and less hospitable to fraud and money laundering. But cash purchases present a more complex gap that we seek to address," she continued. These (rules) will produce valuable data that will assist law enforcement and inform our broader efforts to combat money laundering in the real estate sector.”

Most Popular Articles

3d rendering of a row of luxury townhouses along a street

Log In

Forgot Password?

Don't have an account? Please