Prosecutor pushes for more LLC transparency

Industry worries that ending anonymity would “chill” real estate transactions

National /
Feb.February 09, 2021 05:30 PM
Cyrus Vance (Getty, iStock/Illustration by Alexis Manrodt for The Real Deal)

Cyrus Vance (Getty, iStock/Illustration by Alexis Manrodt for The Real Deal)

A month after a federal law required more transparency on real estate transactions, Manhattan District Attorney Cyrus Vance wants it expanded.

Vance is requesting the Treasury Department mandate more reporting from special purpose entities — notably limited liability companies — which are commonly used in commercial real estate deals.

Vance also asked Treasury on Monday to end anonymous, all-cash purchases of homes. He said the agency could do that by requiring Geographic Targeting Orders on all such transactions. GTOs require title insurance companies to collect and report information about the people behind the deals.

Vance said that information has been used to expose money-laundering schemes in a dozen metropolitan areas, including New York, but the Treasury Department should make it possible to get names faster and more easily.

“Implementing these measures would signal a new era of anti-corruption, equal justice, and accountability for white-collar criminals in America,” said the district attorney.

Vance’s push for expanded reporting comes on the heels of the passage of the Corporate Transparency Act, which became law on Jan. 1.

The law mandates that corporations, limited liability companies and even limited partnerships report the name, date of birth, address and a unique identifying number for each beneficial owner.

The companies must file the information with the Financial Crimes Enforcement Network. While it would not be public, financial institutions could request it with the consent of the company that reported it. Existing companies have two years to comply with the new rules.

Vance also called for Treasury to expand the “Know Your Customer” rules in the Patriot Act, which require banks to make an effort to verify the identity of those they do business with. Vance wants the agency to expand that requirement to private equity firms, the real estate industry and lawyers involved in large transactions.

Terri Adler, who chairs the real estate practice group at law firm Duval & Stachenfeld, said Vance should let the Corporate Transparency Act roll out before expanding it. She said additional reporting requirements, particularly those that make personal information public, could drive investors to markets which provide more anonymity.

“If you want to use a special purpose entity to buy your Florida condo, and you don’t want people to come to your home and stalk you, that should be okay,” said Adler. “A chill on real estate transactions will happen if this becomes some expansive witch hunt.”

The attorney said the phrase “shell company” has taken on an undeservedly negative connotation.

“In reality, every real estate transaction on the commercial side is done through a special-purpose entity that creates an isolation of liability and bankruptcy risk so that the lender knows there aren’t other liabilities and other risks, and so it can accurately assess ownership and predict value,” she said.

The reporting requirements mandated by the Corporate Transparency Act would curb the use of LLCs to launder money, Adler said. The law also provides some important carveouts — for banks, publicly traded companies, insurance companies and nonprofits, as well as any company that employs more than 20 full-time employees in the U.S. or has a physical office here, or generates more than $5 million in gross receipts annually.






    Related Articles

    arrow_forward_ios
    Trio charged with defrauding real estate investors out of $155M
    Trio charged with defrauding real estate investors out of $155M
    Trio charged with defrauding real estate investors out of $155M
    (Netflix / Billy Corben)
    These Miami properties play cameo roles in “Cocaine Cowboys: The Kings of Miami”
    These Miami properties play cameo roles in “Cocaine Cowboys: The Kings of Miami”
    Federal prosecutors allege Naman Wakil laundered ill-gotten Venezuelan contracts with Miami area condo purchases (Getty)
    Miami man charged in Venezuelan money laundering scheme, allegedly using proceeds to buy condos
    Miami man charged in Venezuelan money laundering scheme, allegedly using proceeds to buy condos
    Guillermo Lasso and the Asia Brickell Key condo in Miami
    Ecuadorian president’s alleged Florida real estate ties raise questions
    Ecuadorian president’s alleged Florida real estate ties raise questions
    Dusko Bruer pictured with one of his yachts and his Lake Worth property. (Facebook via Bruer, Southern District of Florida | United States District Court)
    Palm Beach County resident who evaded taxes, splurged on Lake Worth Beach manse, sentenced
    Palm Beach County resident who evaded taxes, splurged on Lake Worth Beach manse, sentenced
    Matthias Krull (Linkedin, iStock, US District Court - Sourthern District of Florida/Illustration by Alexis Manrodt for The Real Deal)
    Swiss banker’s sentence slashed in alleged $1B Venezuelan money laundering scheme
    Swiss banker’s sentence slashed in alleged $1B Venezuelan money laundering scheme
    2701 Jockey Circle in Davie, FL (Google Maps, iStock)
    Leaked bank documents show South Florida real estate’s alleged ties to money laundering
    Leaked bank documents show South Florida real estate’s alleged ties to money laundering
    Brickell Flatiron
    Venezuelan who purchased Brickell Flatiron condo pleads guilty to money laundering
    Venezuelan who purchased Brickell Flatiron condo pleads guilty to money laundering
    arrow_forward_ios

    The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

    Loading...