Treasury to expand reporting on shell companies in real estate deals

Potential regulations part of Biden administration’s corruption crackdown

President Joe Biden (Getty, iStock)
President Joe Biden (Getty, iStock)

President Joe Biden’s administration is reportedly set to make life more difficult for those looking to make all-cash real estate purchases in the United States using shell companies.

The Treasury Department is looking to develop reporting regulations for all-cash deals, Bloomberg reported, citing two senior administration officials. The report comes as the Treasury Department’s Financial Crimes Enforcement Network on Monday gave advanced notice for proposed rules ahead of a public comment period.

Bloomberg reported that a potential rule could require title insurance companies to reveal more information about cash deals transacted through shell companies.

Under the current rules, title insurance companies are required to identify owners behind shell companies’ all-cash purchases of homes for more than $300,000 in about a dozen markets. New rules could increase markets and expand the efforts to commercial properties.

New York, Chicago, Los Angeles and San Francisco are among the markets where current reporting rules are in effect.

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“Increasing transparency in the real estate sector will curb the ability of corrupt officials and criminals to launder the proceeds of their ill-gotten gains through the U.S. real estate market,” Himamauli Das, Acting Director of Treasury’s Financial Crimes Enforcement Network, said in a statement reported by Bloomberg.

The news of expanded real estate transaction reporting comes days ahead of the president’s Summit for Democracy, where the administration is slated to host a virtual meeting of leaders from government and business.

This isn’t the first federal attempt to create disclosures for more information about who is behind shell companies. The Corporate Transparency Act enacted in January required the true owners of shell companies to identify themselves to FinCEN. But the database of beneficial owners was not made publicly available and some industry experts believed the law lacked teeth.

An investigation by the International Consortium of Investigative Journalists published last month detailed the global reach of shell companies using anonymous transactions. The Pandora Papers linked the likes of Ecuadorian President Guillermo Lasso, singer-songwriter Julio Iglesias and King of Jordan Abdullah II bin Al-Hussein to millions in assets that had sometimes been funneled into real estate.

[Bloomberg] — Holden Walter-Warner