A pilot program to uncover the names of luxury real estate buyers in Miami-Dade County and New York City could one day expand nationwide if it proves successful.
The recently announced program by the U.S. Treasury Department stems, in part, from a series of stories published by The New York Times. It’s the first time U.S. authorities have demanded the names of cash buyers.
In Miami-Dade County, the rule will apply to all cash sales worth more than $1 million; in New York City, it applies to sales $3 million or higher. The test program runs from March through August.
“We are concerned about the possibility that dirty money is being put into luxury real estate,” says Jennifer Shasky Calvery, director of the Financial Crimes Enforcement Network. “We think some of the bigger risk is around the least transparent transactions.”
According to The New York Times, the Treasury Department isn’t the only federal agency boosting its oversight of luxury home sales’ potential to hide ill-gotten gains. The Justice Department will start to focus on real estate deals separately rather than include them in bigger transactions; and the Federal Bureau of Investigation (FBI) plans to create a new unit that focuses on money laundering with real estate “a central emphasis.”
According to the Treasury Department, it will focus on shell company buyers of upscale real estate, which are often LLCs, partnerships or other financial entities. It will require title insurance companies to discover buyers actual identifies and report the information.
Shell buyers are legal but “often mask their identities by layering companies on top of other shell companies,” according to the newspaper. “Buyers also commonly fill out LLC formation papers using the names of lawyers or other placeholders, often called ‘nominees,’ instead of their own names.”
Under Treasury rules, a “beneficial owner” – one whose name must be sent to the department – are “each individual who, directly or indirectly, owns 25 percent or more of the equity interests.”
“Repeated anecdotal information where we see criminals of different stripes putting money into real estate all suggest to us that this is an area we need to pay attention to,” says Calvary.
Source: The New York Times, Jan. 13, 2017, Louise Story
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