Will U.S. maintain AML pressure on all-cash real-estate buys?


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FinCEN AML scrutiny on luxury real estate set to expire Feb. 23

The luxury real-estate market is well known as a lure for money laundering. Millions of dollars in all-cash transactions occur regularly—without any of the AML/CTF scrutiny that applies to financial institutions. High-value cities like London, New York, Miami, and Vancouver are especially appealing to criminals looking to launder funds.

The U.S. Treasury Department’s FinCEN agency experimented last year with a GTO—a geographic targeting order that authorized the identification and tracking of secret buyers of high-end real estate in New York and Miami. But FinCEN’s current GTO is set to expire Feb. 23, and analysts wonder whether the new U.S. president—who made his fortune in real estate—will press forward with efforts to expose money laundering in the real-estate market.

The Miami Herald posed that question this week as the real-estate market in Maimi-Dade County has often been implicated in this problem, and it was one of the first areas targeted by the GTO. In that geographic area, cash purchases of $1 million or more are subjected to FinCEN scrutiny.

The Herald report notes that for the first time, a U.S. president enters that position with a personal fortune earned largely through deals in real-estate development. Moreover, this is a president who campaigned both on improving law and order and also on deregulation; in this AML Compliance context, those two interests might not easily align. Law enforcement has supported the AML scrutiny on all-cash real-estate sales, according to the Herald, while those in the real-estate sector have sharply criticized it.

The report notes that 70 percent of foreign buyers in the South Florida real-estate market make all-cash offers, a fact that implies a level of wealth and bidding power that pushes real-estate prices beyond the reach of many local residents.

The Herald quoted U.S. Homeland Security agent John Tobon as acknowledging that the rate of suspicious activity tracked over the last year is very high: ““We don’t come across [money laundering in real estate] once every 10 or 12 cases,” he said. “We come across real estate being purchased with illicit funds once every other case. And then the challenge becomes who is the real owner. … When we knock on the door of the individuals involved in the real estate transaction, they say they don’t know.”

FinCEN has not yet given any hint as to whether the GTO program will be renewed, expanded, made permanent, or completely shelved.

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