Treasury Steps Up Fight Against Real Estate Money Laundering

Regulators in the United States are closing in on a rule targeting anonymous purchases of luxury real estate.

The Treasury Department is expected to propose a rule that effectively bars such a hidden activity, Reuters reported. The department’s Financial Crimes Enforcement Network is scheduled to propose the rule this month, though exact timing is unclear.

The rule is anticipated to require real estate professionals like title insurers to report the identities of the beneficial owners of companies purchasing real estate. While some wealthy buyers use companies to keep their dealings private, others have taken advantage of anonymity to hide and launder money.

In March, Treasury Secretary Janet Yellen claimed that up to $2.3 billion was laundered via real estate in the country between 2015 and 2020.

The forthcoming rule has been gestating in the department for two years, but the real estate reporting regulation has been slowed by a similar FinCEN effort to unmask the owners of shell companies, a rule that still hasn’t been established.

Without the upcoming rule, FinCEN’s real estate reporting rules are limited to a patchwork of targeted cities across the country, including New York, Los Angeles and Miami. Federal rules require title insurers to report ownership information about shell companies making all-cash deals worth $300,000 or more in approximately a dozen markets.

Those laundering money have been able to sidestep the quilt defense by making purchases outside of these targeted markets.

One example involves Steve Bannon’s former business partner, Guo Wengui. The exiled Chinese billionaire has been accused of using a shell company to funnel $26 million of ill-gotten gains into a mansion purchase in New Jersey two years ago. If that purchase occurred in Manhattan, it would have tripped alarms.

While the new rule should help expose more money laundering schemes and dissuade illicit real estate activity, there are concerns that FinCEN lacks the funding and resources to adequately enforce its efforts.

— Holden Walter-Warner