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Sayonara shell companies: US cracks down on “dirty money” property sales
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Sayonara shell companies: US cracks down on “dirty money” property sales

Shell companies can’t make secret property transactions in NYC

American authorities are taking on secretive transactions on property in the USA and cash buyers for the first time in history. On January 13, 2016, the United States Treasury Department announced the forthcoming obligation for U.S. title insurance companies to “identify the natural persons behind companies used to pay ‘all cash’ for high-end real estate.” Manhattan and Miami-Dade County are the targets of this experimental policy.

The Treasury Department hopes to tackle money laundering by forcing title companies to disclose the names of individuals behind opaque business structures. Geo-Targeting Orders, or “GTOs”, will come into effect just two months from now, on March 1, 2016 and operate until August 27. The officials hope that this six-month measure will catch corrupt foreign officials who are trying to stash away cash they syphoned off back home.

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“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,” said Financial Crimes Enforcement Network (FinCEN) Director Jennifer Shasky Calvery, as reported by the Treasury Department’s press release.

This comes after a game-changing 2015 on international markets that spurred on investments in the United States. America ranked first in CBRE’s report on the Top Ten World Real Estate Markets 2015, posting investments totalling $222.4 billion for H1 2015. Manhattan, itself a leading international market, attracted $23.5 billion of the nationwide total in 2015, according to data by Real Capital, a commercial real estate investing company.

The arrival en masse of Chinese investors, who replaced Canadians as leading buyers in the Land of Freedom, brought billions into hot urban markets in the United States, particularly Manhattan, where their aggressive purchasing tactics sparked rumours of a new “China price”.

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Their investors spent just under $30 billion over a one-year period that ended in March 2015 according to the Wall Street Journal. Real estate stakeholders in the Big Apple also report that supply of “trophy” property is drying up after the onslaught of foreign money, but also that cash payments and remote purchasing have become more commonplace over the last year.

The move by FinCEN should not be a surprise for industry stakeholders however as more newspapers broached the subject. The rise in media coverage is also credited with attracting the attention of the US Treasury Department, particularly the “Towers of Secrecy: Piercing Shell Companies” by the New York Times.

However, the decision comes too late to catch the mysterious buyer of a $47 million mansion in Miami-Dade County, registered under Boca Breeze, a Delaware shell company. The two-acre property sold for the second highest price ever registered in the county.

Leigh Stewart, Tranio

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