Is The Money-Laundering Driven Real Estate "Boom" Ending?

Tyler Durden's picture

One by one all the money-laundering loopholes in a broke world are coming to an end.

First it was Swiss bank accounts, which for centuries guaranteed the depositors absolute secrecy, and as a result saw money inflows from all the wealthiest savers in the world, who felt truly safe their wealth (obtained by legal means or otherwise) would not be redistributed forcefully. In the ecosystem of finance, Switzerland was the depositor bank. Then 2008 happened, and starting with the US, shortly to be followed by every other insolvent country, demands were issued for a full list of people who had used Zurich and Geneva bank vaults to avoid the risk of asset taxation, capital controls and confiscation on their own native soil. The result was the end of the Swiss banking sector as the ultimate target of all global money laundering. In the ensuing power vacuum, others have sprung up to take its place, most notably Singapore, but its days as a tax-haven are numbered by how long it takes China to fall face first into a hard landing at which point no saving on the Pacific seaboard will be safe.

Now, it is the turn of real estate.

While hardly a secret, for decades the ultra-luxury housing segment in any country was the target not so much of local wealthy individuals and business, but foreigners, for whom the grass was always greener, and sought to put their money into "hard assets" abroad to save it from local confiscation. After all, it is far easier to be sued and prosecuted by your own government than a foreign one. Two very vivid examples are the most expensive house in Miami ever sold, which two months ago fetched a price of $47 million, which was purchased by "a Russian who bought the home in the name of a U.S.-based limited-liability company" and in the until recently a record $88 million paid for a 15 CPW penthouse for the daughter of Russian billionaire, Dmitry Rybolovlev (bought from Citi's Sandy "End TBTF" Weill). The record was topped at $90 million paid for a One57 duplex apartment paid by an unknown individual, almost certainly a foreigner.

The common theme here of course is that foreigners come to the US (or London, or Geneva, or Hong Kong) or any other wealthy megapolis with their almost always ill-gotten, and untaxed gains, spend the money indiscriminately on local real estate even as the local authorities look the other way because by lifting any offer, these foreigners, while laundering illegal money, are also keeping the all important housing market afloat thus perpetuing the illusion that the domestic economic is rising. Instead all that is happening is it is attracting illegal foreign capital flows.

The biggest beneficiary so fas has been the US, which in the past 2 years has seen not one but four housing markets develop, as we have showed before.

And while the lower-end segment has continued to implode (see Foreclosure Stuffing), it is the ultra-luxury part of US housing that has bootstrapped the housing market.

For now. Because if London is any indication, global ultra-luxury real estate market is the next "Swiss bank account."

What happened in London? The NYT explains:

At the request of the Athens government, the British financial authorities recently handed over a detailed list of about 400 Greek individuals who have bought and sold London properties since 2009.


The list, closely guarded, has not been publicly disclosed. But Greek officials are examining it to determine whether the people named — who they say include prominent businessmen, bankers, shipping tycoons and professional athletes — have deceived the tax authorities by understating their wealth.


“These people have money and they are known — but it is not clear yet if they have violated any laws,” said Haris Theoharis, an official in the Greek Finance Ministry. Tax investigators have been examining the list to see whether there is any overlap between those who bought London properties and those already identified as being tax cheats.

What a broke Greece will find without a doubt, is that of the 400 Greeks who spent millions on London real estate, virtually none paid any taxes in previous years. Also, they most certainly declared zero offshore real estate. After all why should they: until this moment foreign real estate was the default mode of funneling capital into safe destinations.

Alas, as the Swiss banking SNAFU showed, in the New Normal, nothing can be taken for granted any more. First it is Greek demands for London real estate transparency. Next it will be Putin asking Geneva and Vienna to point out which Russian oligarchs bought real estate there, then Mariano Rajoy, as broke as Greece, will ask for a list of all Spaniards buying real estate in London and Geneva. Until finally, someone returns the favor to Uncle Sam, who was the first to blow up the myth of Swiss bank secrecy, and requests a list of all broke European buying real estate anywhere between New York to Los Angeles.

What happens then? Well, as we have been writing for months, for now the NAR, best known for misrepresenting the real state of the existing US housing market for years, has an open waiver for anti-money laundering regulation from none other than Uncle Sam. Because while it is one thing to blow up the biggest breadwinning industry in Switzerland to pad the tax bill and to spread class warfare, it is something totally different to represent to the world that ultra-luxury segment aside, which is merely an artifact of global money laundering, the US real estate housing emperor is as naked as he was 4 years ago.

As a reminder, here is where the NAR stands on the issue of its most generous clients possibly being some of the worst criminals known to man, courtesy of Elanus Capital:

Many of you reading this will undoubtedly have spent time in an international bank and been forced to sit through countless hours of “know your client” and AML training. Fascinating to note that the National Association of Realtors lobbied for and received a waiver from such regulation. That’s right, realtors actually went to the U.S. government and said: we want to be able to help foreign business oligarchs and other nefarious business people launder money through the real estate markets of the United States – and prevailed.


Here's their official position:


"NAR supports continued efforts to combat money laundering and the financing of terrorism through the regulation of entities using a risk-based analysis. Any risk-based assessment would likely find very little risk of money laundering involving real estate agents or brokers. Regulations that would require real estate agents and brokers to adopt anti-money laundering programs may prove to be burdensome and unnecessary given the existing ML/TF regulations that already apply to United States financial institutions."


Hat’s off to the NAR – that is some serious doublespeak. My translation: We’ll support you as long as we don’t have to support you.

Indeed it is. What the NAR is saying is that for now go ahead and lift every offer on every duplex and triplex off Central Park. Your money is absolutely safe with us... this instant. But the second a broke Europe comes demanding reparations for endorsing 4 more years of Obama (something that was already documented), for destroying the Swiss banking industry, and for keeping the EUR much higher than it would have been had it not been the Chairman's 5 easing episodes, all bets are off.

This means all European, Asian, and even local oligarchs may be sweating just a little bit, now that the winds have shifted, and suddenly what was considered safe and untouchable, has become fair game in the great "fairness" redistribution scheme that is the only game left in a broke and insolvent global town.

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GrinandBearit's picture

Is The Money-Laundering Driven Real Estate Boom Ending?

$40 billion in MBS purchases a month tells me it won't be ending for quite a while.

$40 billion/month is only what they're admitting to.  Lord only know what they're doing behind the scenes to prop this pig up.

theMAXILOPEZpsycho's picture

My portfolio remains 60% us treasuries, 40% apple, and 10% facebook, but I have to say I think housing is a wonderful buy. In places like london and vancouver prices are just going up and up. Investors should be worried about being left out of this spectacular new bull market; I know I am. Think about it - there are more and more people; therefore houses can only go up. So invest in housing and MBS. Thats why I first bought treasuries; I thought to myself, now who's the smartest when it comes to economics? Why, its Bernanke of course; I followed his lead and have been richly rewarded. I'm looking to add to my real estate exposure. And best of all, along with investing in treasuries, this is what will get the feel good factor back for the economy. 1990 style all over again! Its going to be sweet!

Troll Magnet's picture

really? my portfolio is 30% equities, 30% cash, 30% bonds, 39% commodities, 27% real eatate and 85% super lotto.

grid-b-gone's picture

Ah, the Fed model portfolio, except the official term for 'super lotto' is 'recovery'.

Mae Kadoodie's picture

Regrettably, I lost my luxury hi-rise rise investment condo in a boating accident.

FoxMulder's picture

Remember ladies, using NAR to remove hair from your pubic region can cause irritation.

strannick's picture

Get gold, not to be confused with GLD, and store it somewhere safe, not to be confused with Barclays new vault.

Pinch's picture

The rich CHINESE are buying expensive and not-so-expensive real estate all over the world, especially in AUSTRALIA. The outflows of money from China are staggering. What do the rich Chinese know that we don't?

BigDuke6's picture

i'd be happy if the useless aussie gov got a demand from china for a list of chinese RE buyers.

but communism being socialism i dont see it.

giovanni_f's picture

does the theMAXILOPEZpsycho muppet know that all his assets have been rehypothecated by Troll Magnet?

Papasmurf's picture

You have a lot of counterparty risk in that super lotto.  Hedge that with MegaMillions.

AlaricBalth's picture

Senator, I served with MDB, I knew MDB, MDB was a friend of mine. Senator, he's no MDB.

TheFourthStooge-ing's picture


My portfolio remains 60% us treasuries, 40% apple, and 10% facebook, but I have to say I think housing is a wonderful buy.

My portfolio remains half gold, half silver, half lead, half tools, half stored food and water, and half books on useful and forgotten skills.

A Lunatic's picture

I lost my portfolio in a terrible boating accident................

Overfed's picture

Everybody is tryin' to get into the act!

Buckaroo Banzai's picture

In all fairness, not a bad imitation of MDB style.

James_Cole's picture

Vancouver sales volume is way down, prices have been finally catching up too. Not "up and up"

LongSoupLine's picture

What the fuck do you expect?!...the head of NAR is a Chinese national.



this country is fucking fucked.

eatthebanksters's picture

The NAR has absolutely no credibility anymore to anyone who understands real estate.  In January of this year they admitted 'flaws' in their calculations for the previous 5 years for their estimates of sold homes.  Self admittedly they were off by as much as 16%...of course they had absolutely no impact on the marktets during that time period.  Developers certainly did not use the information for macro forecasting and did not include the data in their decisions to continue building into a busted market.  Mortgage lenders certainly did not use the info to forecast capital needs going forward.  The NAR ought to be sued, along with the TBTF banks for the fraud they perpetrated on the American people and the damages that resulted from those actions. At the least, the parent organization of a slimy business seeking respect and legitimacy has set that reputation back a couple of generations.  If I were a broker or agent, I would run as far from the NAR as I could so their slime couldn't touch me.

kall's picture

Let's not think for the worse, I'm sick of picturing pessimistic frames, I need a little bit of optimism to live my days one by one. I know real estate today is just a huge mess but I am content that I afford to pay my home warranty, it's all I want to be worried about today, it's all I need.

krispkritter's picture

The Tax Man Cometh...


At the request of the Athens government, the British financial authorities recently handed over a detailed list of about 400 Greek individuals who have bought and sold London properties since 2009.

eatthebanksters's picture

Can you say wealth redistribution? It's funny how governments have waited until their financial systems implode before they decided go after wealthy tax cheats.  While politicians still had money to buy off the lower and middle classes thy didn't give a shit what the wealthy were doing.  Now that the voters are screaming for thier freebies the pols are directing that anger at a small constituency. I am not supportive of wealthy tax cheats, but I absolutely despise corrupt self serving politicians who get going both ways!!!

The Alarmist's picture

Is The Money-Laundering Driven Real Estate Boom Ending?

No, but the wealth-preserving aspects of real-estate ownership both at home and abroad are being stripped away from average Joes like you and me. 

Zola's picture

I'm not sure about your statement regarding Singapore Tyler- and HK as well. It will be very telling what China tells the US about its imperial overreach regarding offshore regulations- and i would assume it is in their interest to tell the US and everyone else to go **** themselves. They would be quite foolish not to do it and vaccum all the capital out there as corrupt and terminally bankrupt governments drive all productive people and their assets away with unacceptable taxation

Arnold Ziffel's picture

Old Paradigm: Launder your illegal money via pizza shops and hcinese restaurants.

New Paradigm: Launder your loot thru real estate in Hong Kong, NYC and Vancouver.


Another reason house prices are severely overpriced and out of reach of the average law abiding working stiff.

Fred Hayek's picture

If the law abiding working stiff can wait another year or two those prices will come down. Way down.

DutchMadness's picture

Except for the Saudi Arabia folks, and neighbouring friends there.. they are of " National Interest for the United States " and therefore exempted of any check-ups and inquiries about there businesses and real estate affairs...

waylon153's picture

Swiss bank accounts....saw money inflows from all the wealthiest savers in the world simply opened their own banks.


Fixed it for you.  In America, for about $250,000 you can start your own bank. Put your brother in law in charge and your other family members on the board of directors.


Problem solved for the wealthiest savers in the world.

billsykes's picture

Man I want a bank. Especially like those machined valuts.


Why doesn't some nut open a bank that doesn't lend? Just keeps the money for a higher fee? Like a regular bank but just no retail/commercial lending and a larger safety deposit section.





savagegoose's picture

there must be 1000 of us on here with $250 spare folding. we could open a bank. we could call it pyramid bank. it could pay dividends in gold coin and well fget loads of bailouts.

q99x2's picture

Money is such a headache I'm glad I don't have any.

Cultural Capital's picture

Ignorance is bliss: trust me, you'd rather stay on the dole than fill out a 5471 form.

FreedomGuy's picture

There are several problems within this article. I am no fan of governments chasing down anyone, rich or poor for money. Government chases everyone even if not in the same way. In traffic court you will see people who driver beater cars being fined for not forcibly buying private auto insurance. Red light cameras are for revenue, not safety. On the other extreme you have governments chasing the "oligarchs" by raiding Swiss accounts and now property records, I guess.

If these oligarchs or wealthy individuals have actually done something illegal then they should be tracked down and prosecuted in their own countries. If they are using legal loopholes in the tax codes, then tough luck for governments. I would suggest the governments simplify and lower their tax 5% flat tax, no deductions. Instead, the USA has 72000 pages with carve outs, loopholes, and traps, as well. No human can process that many rules. With tax codes like that "law" simply becomes a tool of the weatlhy, powerful and connected and loses all moral authority.

Collectivisim loses all moral authority from the beginning. It forcibly takes what "legally" belongs to one person and gives it to another. It does for the receiver of the goods what would be illegal for that person to do for themselves, namely take/steal it by force. So, you have immoral forms of government trying to track down theoretically immoral law breakers. You figure out who the good and bad guys are in that scenario for me. Were the black market Russians in the Soviet Union good guys or bad? In an immoral corrupt system like the Soviet Union they were the good guys that got you what you needed at considerable risk to themselves. In a moral country the police are good guys. In a corrupt country like the old Soviets they are the bad guys.

So, in this story I have divided feelings and it is hard to tell exactly who is good and bad and to what degree. Keeping your own honestly earned money is essentially good. Hiding "stolen" money is bad but it seems authorities should have to do their homework with proper prosecutions and evidence. They should have probable cause before they are allowed to get private records and accounts.

cxl9's picture

Tax avoiders of all classes should be cheered, not condemned. Every dollar [or Euro] of tax gives government that much more money to spend on harassing, abusing, and regulating its citizens. Government long ago stopped providing any useful services, and is now simply in the business of perpetuating its own existence and further consolidating its power. The idea that if everyone paid their taxes in full we would somehow all be better off is laughable. I would rather see a rich man stash his wealth away in some foreign land than give it to the government to spend on hiring more thugs, buying more bullets, assembling more databases of information on the citizens, and giving away more wealth to those who have not earned it.

bigkahuna's picture

The caca is going to RAIN down.

My first thought on reading these comments. "Uncle sugar" is going to have every thug including cops and cop-like agencies chasing people down in the streets.

FreedomGuy's picture

I agree in principle. There is no tax rate at which all problems with be solved therefore the natural progression is to a 100% tax rate, or slave state. However, the pain must be shared equally in the sense that the wealthy have more influence. If they escape the apin of the system or even benefit from it then they are disinclined to change it.

If Obama is reelected then I personally believe we will have passed the point of no return in our own collectivist evolution. There are and will be so many "takers" in the system it will collapse. Government has made too many open ended promises it cannot fulfill. However, the Obama ads perpetuate the lie that it can continue with him in charge.

Joe A's picture

I always wondered why the Swiss more or less gave up their bank secrecy. Why would you wanna do that and give your wealth away? What were they threatened with?

James's picture

I always wondered why the Swiss more or less gave up their bank secrecy. Why would you wanna do that and give your wealth away? What were they threatened with?



Could be because they were threatened w/revocation of charters ala UBS

Ghordius's picture

Some of it still remains for Non-US citizens.. Why did the Swiss cave in so much so far? Immense diplomatic pressure and a couple of dirty tricks by a couple of MegaBanks.

Look it this way: Delaware for the US, Jersey & Guernsey for the UK, the City of London for Greeks et al, Luxembourg for the EZ, Cyprus for Russian et al, Singapore in Asia and of course Caribbian Islands of all tastes. It's all competition, and it fights for it's "war against dirty money".

The only workable "rational solution" would be to declare a flat tax of 30% worldwide and lower this "highest marginal rate" according to national laws, like the US tax rebates or the other transfer payments.

I presume this is the wrong place for this thought to find many friends...

The real issue is that corporate taxation is subject to relentless competition and dwindling, as trade taxation - as requested by liberals and neo-liberals for two centuries.. This leaves the "natural" citizen the only field left for the tax farmer.

Twenty years ago if someone would have told me that consumption taxes in the EU would get over 20% I would have laughed...

Buckaroo Banzai's picture

Fuck the "flat tax". Income taxes above 0% are nothing less than slavery.

i-dog's picture


"declare a flat tax of 30% worldwide"

The globalists' wet dream!! (and hardly "rational"....)

Though, I'm sure it sits well with the citizens of bankrupt Mediterranean and other developed world nations, looking to find more of someone else's money to spend.

However, one needs to ask why citizens living in mud huts or rural backwaters, with no access to utilities or government services, should be bludgeoned into paying the same tax rate as those in a Marxist western metropolis ... simply to pay for multi-billion dollar sewage treatment plants in a politician's home town, or futher military expansion by ZATO.

Each community (ie. nation state, under the present paradigm) should be free to determine, and agree upon, its own level of communally-funded infrastructure ... and keep its hands out of the pockets of other communities who feel differently.

High taxation to support transfer payments and excessive development should be restricted to those communities who choose to live in that way. Others may prefer a more rural and self-dependent lifestyle, or an efficient city state like Hong Kong, funded by 'user pays' for infrastructure and private insurance for everything else. Both options should be available to choose from by "voting with one's feet".

Only a maniacal Khazarian would want to rule the world and decree a "one size fits all" regime!

Ghordius's picture

knee jerk reaction? It's about wealth and income that is outside the communities, specifically in tax havens, remember? Did you read that part "lower this "highest marginal rate" according to national laws"? I'm just extrapolating from the Swiss proposals on how to tax those private funds without getting "too personal".

look around, fact is that governments all around the world spend a fraction of GDP first and then look around what to tax to get even

and this is the tragedy of the US fiscal conservatives, IMHO. They seldom bring numbers, like 10% of GDP for defence, 10% for transfer payments and 10% for all the rest...

Son of Loki's picture

RE prices in HK and Vancouver are Uber-Distorted.

Urban Redneck's picture

Silly Greeks, only the little fish use their own name on high-end property, but of course you don't even want to know about the really big fish because they might push back and smack your cleptocrat asses back into line...


Knightsbridge mansion once owned by assassinated Lebanese prime minister on sale for £300m - DOUBLE the previous UK house price record