When it comes to high-end real estate, large numbers can mean large issues, and these mega-deals aren’t escaping the glare of prying government eyes.
According to the U.S. treasury department, 30 percent of high-end real estate deals that were subject under a new watchdog program involved “suspicious activity” and potential money-laundering.
According to a CNBC report, the program has been expanded and extended and a loophole has been closed which has resulted in real estate purchases completed via wire transfer receive the same scrutiny as an all-cash deal.
Under the program, title insurance companies have to determine the true owners of LLC’s or shell companies doing all-cash deals to buy real estate above a certain price in a number of high-end markets, including New York City, Miami, San Diego and the San Francisco Bay area.
A number of analysts maintain that the greatest impact could be in southern Florida – Miami in particular – which has a glut of new high-end condos and has relied heavily on buyers from Latin America, some of whom have come under government scrutiny for corruption or money laundering. Nela Richardson, chief economist for Redfin, said the move could have a chilling effect.
“That very high end of the market is the most vulnerable to these issues. If a lot of foreign buyers were parking their money in high-end real estate and that much of it is tainted, this rule will have an impact.”
A key issue has been closing the loophole that involves wire transfers. Brokers say that ever since the rules were first imposed in 2016, buyers could easily avoid them by using wire transfers. That has been changed. FinCEN Acting Director Jamal El-Hindi pointed out that wire transfers will also be subject to the rule — closing the loophole.
“Through this advisory and other outreach to the private sector, FinCEN, industry, and law enforcement will be better positioned to protect the real estate markets from serving as a vehicle to launder illicit proceeds.”