The End Of The Luxury Housing Boom: US Treasury Launches Crack Down On Secret Buyers Of Luxury Real Estate
Over three years ago, in August 2012, we described how while US regulators and authorities were cracking down on such "illegal" banks as Standard Chartered and HSBC, they were allowing the non-corporate shielded entities, the actual individuals who benefited from the bank crimes, slip through the cracks simply by allowing them to park billions of ill-gotten gains in US real estate:
When it comes to the true elephant in the room, which is not foreign and is fully domestic, they continue to ignore events such as this one just described by the Wall Street Journal: "A Florida home that originally listed for $60 million has sold for $47 million, a record for a single-family house in Miami-Dade County. The home, in Indian Creek Village, had been on the market since early 2011, when construction was still being completed. The asking price was reduced to $52 million this year." And the punchline: "The identity of the buyer, a foreigner who purchased the home in the name of a U.S.-based limited-liability company, couldn't be learned." In other words a foreigner who may or may not have engaged in massive criminal activity and/or dealt with Iran, Afghanistan, or any other bogeyman du jour at some point in their past, and is using US real estate merely as a money-laundering front perhaps? Sadly, we will never know. Why? As explained before, it is all thanks to the National Association of Realtors - those wonderful people who bring you the existing home sales update every month (with a documented upward bias every single time) - which just so happens is the only organization that actively lobbied for and received an exemption from AML regulation compliance. In other words, unlike HSBC, the NAR is untouchable, even if it were to sell a triplex to Ahmedinejad on West 57th street.
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.
If after skimming the above, readers are still confused what the reason is for the luxury segment of the US housing market continuing to rise in price and hit record highs, even as all other segments of the quadruplicate US housing market as explained here languish, the explanation was very simple (and explained most recently back in October): the "hot money" belonging to Chinese and all other global oligarchs would be laundered by parking into the new "Swiss bank account" that U.S. real estate has become.
However, just like Swiss bank accounts lost all their anonymity shortly after the Global Financial Crisis, and led to massive fund outflows from Switzerland (and ironically, into luxury US real estate), so after many years of us explaining how the ultra luxury segment of the US real estate market was being used as a money laundry vehicle, the US government has finally decided to crack down on these "secret" buyers.
As the NYT reports, "concerned about illicit money flowing into luxury real estate, the Treasury Department said Wednesday that it would begin identifying and tracking secret buyers of high-end properties."
The initiative will start in two of the nation’s major destinations for global wealth: Manhattan and Miami-Dade County. It will shine a light on the darkest corner of the real estate market: all-cash purchases made by shell companies that often shield purchasers’ identities.
It is the first time the federal government has required real estate companies to disclose names behind all-cash transactions, and it is likely to send shudders through the real estate industry, which has benefited enormously in recent years from a building boom increasingly dependent on wealthy, secretive buyers.
The logic behind the move is clear: "this initiative is part of a broader federal effort to increase the focus on money laundering in real estate. Treasury and federal law enforcement officials said they were putting greater resources into investigating luxury real estate sales that involve shell companies like limited liability companies, often known as L.L.C.s; partnerships; and other entities."
... a top Treasury official, Jennifer Shasky Calvery, said her agency had seen instances in which multimillion-dollar homes were being used as safe deposit boxes for ill-gotten gains, in transactions made more opaque by the use of anonymous shell companies.
“We are concerned about the possibility that dirty money is being put into luxury real estate,” said Ms. Calvery, the director of the Financial Crimes Enforcement Network, the Treasury unit running the initiative. “We think some of the bigger risk is around the least transparent transactions.”
Our only question is what took so long?
What happens next remains to be seen, but now that the buyer anonymity of luxury real estate buyers is gone, and with it the opportunity to launder illegal money in the US, much to the chagrin of the NAR, we would expect a substantial drop in both demand and prices for the one segment that has so far been the most stable support of the entire U.S. housing market.
* * *
Below is the full announcement by the US Treasury:
FinCEN Takes Aim at Real Estate Secrecy in Manhattan and Miami
“Geographic Targeting Orders” Require Identification for High–End Cash Buyers
WASHINGTON – The Financial Crimes Enforcement Network (FinCEN) today issued Geographic Targeting Orders (GTO) that will temporarily require certain U.S. title insurance companies to identify the natural persons behind companies used to pay “all cash” for high-end residential real estate in the Borough of Manhattan in New York City, New York, and Miami-Dade County, Florida. FinCEN is concerned that all-cash purchases – i.e., those without bank financing – may be conducted by individuals attempting to hide their assets and identity by purchasing residential properties through limited liability companies or other opaque structures. To enhance availability of information pertinent to mitigating this potential money laundering vulnerability, FinCEN will require certain title insurance companies to identify and report the true “beneficial owner” behind a legal entity involved in certain high-end residential real estate transactions in Manhattan and Miami-Dade County.
With these GTOs, FinCEN is proceeding with its risk-based approach to combating money laundering in the real estate sector. Having prioritized anti-money laundering protections on real estate transactions involving lending, FinCEN’s remaining concern is with the money laundering vulnerabilities associated with all-cash real estate transactions. This includes transactions in which individuals use shell companies to purchase high-value residential real estate, primarily in certain large U.S. cities.
“We are seeking to understand the risk that corrupt foreign officials, or transnational criminals, may be using premium U.S. real estate to secretly invest millions in dirty money,” said FinCEN Director Jennifer Shasky Calvery. “Over the years, our rules have evolved to make the standard mortgage market more transparent and less hospitable to fraud and money laundering. But cash purchases present a more complex gap that we seek to address. These GTOs will produce valuable data that will assist law enforcement and inform our broader efforts to combat money laundering in the real estate sector.”
Under specific circumstances, the GTOs will require certain title insurance companies to record and report to FinCEN the beneficial ownership information of legal entities purchasing certain high-value residential real estate without external financing. They will report this information to FinCEN where it will be made available to law enforcement investigators as part of FinCEN’s database.
The information gathered from the GTOs will advance law enforcement’s ability to identify the natural persons involved in transactions vulnerable to abuse for money laundering. This would mitigate the key vulnerability associated with these transactions – the ability for individuals to disguise their involvement in the purchase.
FinCEN is covering certain title insurance companies because title insurance is a common feature in the vast majority of real estate transactions. Title insurance companies thus play a central role that can provide FinCEN with valuable information about real estate transactions of concern. The GTOs do not imply any derogatory finding by FinCEN with respect to the covered companies. To the contrary, FinCEN appreciates the assistance and cooperation of the title insurance companies and the American Land Title Association in protecting the real estate markets from abuse by illicit actors.
The GTOs will be in effect for 180 days beginning on March 1, 2016. They will expire on August 27, 2016.
Any questions about the Orders should be directed to the FinCEN Resource Center at 800-767-2825.
(12 votes)
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I'd guess more that this is going to be a witch hunt for sacrificial lambs, or putting people on notice that "protection money" will be due. Boy talk about being caught between the devil and the deep blue sea because of leaning on criminal activity to prop up markets in the face of rampant government corruption and profligacy.
One might ask where these corrupt foreign officials are from?
This will be used very selectively against those already on someone's shit list.
All legal up here in Canada.
Where they withhold like 20% - 30% of closing proceeds until you file a return and it is "reviewed"?
Killer deal Red!
When one considers how many thousands of lives of small fish "accidental americans" that the IRS, fincen and Obama have destroyed in the last few years with fbars and fatca, the timing of this crack down is really too little, too late.
Let me know when some really important jew-luminati gets nailed. But that won't happen.
focusing on Manhattan and Miami....
sooo..... they clearly don't want to antagonize any of the Chinese money buying up California but then they're paying a million for 2500 sq feet bungalows that wouldn't sell otherwise and tens of millions for 'normal' sized places..... not exactly the ultra high end hundreds of millions being spent in Manhattan Nonetheless there's some huge amounts of money being spent in SF and LA (lots of Middle Eastern types as well as Chinese)
Same as ever.
Knight: "How do you know she's a witch?"
Peasant: "She looks like one"
US Treasury............ Launches? Crack Down? Secret Buyers Of Luxury Real Estate?Laugh Track Deafening!
The US has a lot of expertise when it comes to "dirty money".
It's the pot calling the kettle black!
The whole system is corrupt and ready to implode, we are heading for a reset......
http://beforeitsnews.com/global-unrest/2016/01/the-lion-is-it-time-to-fi...
War on cash!
this isn't about "cash" per se - if anyone ever brought actual bills to a closing they'd be laughed at right before having their $ stol..., er, I mean "civil assets forfeited" about 20 min after the closing attorney called 911...
I would suggest the only reason the feds are getting involved now is because the market is just about tapped out. These new "tenants" may find out it was easier to get their money in than out.
Insure it up, then burn it down.
The article doesn't mean 'cash' as literal suitcase of money. It's a wire transfer from bank A to bank B with the account owner being an LLC.
Holy cow you guys, your sarcasm meters are pretty low
owebomba's treasury department.
omg lololololololol!!!!!!!
If it reigns in the NAR, that's fine with me. What a bunch of crooks.
I see no way to justify Federal involvement in the real estate market. If the buyers or sellers are crooks, go after them for their crimes. Leave the free market alone
And if this involves money laundering, go after the banks (which isn't at all likely to happen).
Becoming a realtor and paying dues to NAR is nothing more than a ponzi scheme.
What say the NAR and Tom Salomone? These people are on the same level of the major banks which launder drug $$$. Cunts, the entire lot of them.
Translation: We weren't getting a big enough piece of the pie so now we're insuring we get our share.
Luxury RE owners pay luxury taxes to the F*cking state! Fed was a slice of that pizza pie! And I believe they deserve it, who made it possible for the place to be built? Tyler?!
Funny no mention of our esteem politicians being involved in multi million dollar real estate schemes... Harry Reid must be thrilled...
.
http://www.ibtimes.co.uk/london-house-prices-sales-prime-property-crash-...
UK house prices to crash as global asset prices unravel Asset prices around the world are collapsing as the global economy slows and UK housing will not escapehttp://www.telegraph.co.uk/finance/property/house-prices/12087971/UK-hou...
We mortgaged some folks....
This is much ado about nothing as the Fed's will 'find nothing'. Otherwise they will accidently shine a light on US representivies using the real estate market to hide their received bribes for their services.
The idiots in "charge" don't realize that the cash buyer will evaporate into a normal mortgage where the property is then rented at 90K a month to the same effect: Moved and Cleaned. Already happening. Look at high end rentals across Florida right now several dozen already are "renting" for 50K+/month... Just like the supply of pot: You cannot stop the flow of this type of activity, criminal or not, when demand is so high. The system will move from normal currency when that becomes impossible... payment in high tech arms (via CIA of course, the real 536 criminals and their henchmen need their cut), pre paid hookers and blow, or whatever the two parties agree upon for payments. Dollars and banking is just the most convenient at the time but isn't traditional, nor necessary.
It doesn't need to be the traditional real estate such as high end home or apartment either. You can use hotels and large scale vacation condos too...
the latin americans don't appreciate the chinese horning in on their turf in south florida. it is time to resurrect the cocaine cowboys to take out some chinks.
why now?
Same question I had, why now? I think the regulatory agencies are trying to get back to work before the next president gets in because god knows he will not be as linient as Obummer. Obama let these agencies sit on their hands for 7 years because he didn't want to fake economy to collapse. Now we have, Fed raised rates, they are going after all cash buyers, SEC ahh well they are probably working on something, maybe... All to save face so the next president doesn't come in here and clean house because they can't show that they have done shit.
Nothing about the Saudis using Podesta to launder a bribe to Obama in the form of a $5 million seaside villa in Dubai?
As usual the Government was asleep at the wheel. Most of this money is from illegal drugs and illegal Chinese Princelings, also friends of Bill and Hill.
As usual the Government was asleep at the wheel. Most of this money is from illegal drugs and illegal Chinese Princelings, also friends of Bill and Hill.
Tax the foreigner and absolve the US corporate?
We need a world agreement on tax havens and treatment of corporates and individuals.
But the Casino that the US admin supports is based on two tier values : one for others one for Greenback denominated Oligarchy.
Hasn't anyone learned anything from the Jap collapse ??
Yawn. The new regulations will be used only against nationals of countries Uncle Sugar or his friends in Riyadh hate or fear, Russians and Jewish Israelis being the bigger targets.
Saudi princes investing in Manhattan bug-outs in preparation for the happy day Riyadh falls to the Russian army will get a pass.
The Chinese will keep heading to Vancouver and Toronto, where a 59-cent loonie will make even VanBC real estate a bargain, and where King Justin will ask far fewer questions.
Place a huge tax on domestic RE purchases by anyone lacking US citizenship.
These are terrorist, "safe houses" filled with high explosives, guns, rocket launchers,MANPADS,drugs and chemical and biological weapons.
No do some plants and then raid taking a news team with you to film all the bad stuff and have it on the news just before Super Bowl.
95% of the public will use the "breaking news" to go to the john and get another 6 pack of beer and then say, ho hum.
and so the Clinton Foundation is NOT a laudromat?
One where a generous 8-9 figure donation gets you a Fed contract somewhere as a stireefront for your laundry?
gimme a break!!!
"Our only question is what took so long?"
Easy!
Obama said that he couldn't be more optimistic about this year to come. Translation: I've done my job, and if all goes well, this just may be the year America falls.
So, it's time to rein in the housing market into total government control: remove all shelter devices, just like they're doing with everything else.
Nothing new here.
I'm bullish in 2016 of some Treasury employees having myserious accidents or happy retirements.
I guess Civil Asset Seizure only applies to US Citizens
Subtext: we're making this very public service announcement so y'all know to please temporarily refrain from money laundering in these locations. Can you guys just spread the wealth a little? And we'll let you know when we're not looking any more.
And so when does this start to effect high end residential properties in California!
30% of California home purchases have been all-cash Chinese oligarch investments.
YAWN
By the time FinCEN collects their data & make a big show of it all, the real criminals will be long gone with their freshly laundered money...
The first & only time we heard from FinCEN should've been a massive arrest/perp walk of the world's most corrupt people... but instead we get this propaganda, which is equivalent to giving the criminals a headstart in avoiding prosecution... well done, FinCEN.
Nothing shocking here. Vancouver British Columbia is a prime case of money laundering. An Asian criminal loved Vancouver so much he built a virtual fortress right at the entrance to Stanley Park. Has the nicest view in Vancouver. The trouble is these people are well known to the police. Their usual way of doing business is to support the political dumshits with gobs of money. If these criminals get tossed we're usually stuck with their families. The kids are usually spoiled ass holes and drive fast cars.
There is an abundance of Asian criminals in Vancouver that are or were once connected to the Chinese government. They pay the usual price for getting their bribe money out of China. HSBC is their usual way of funnelling money. Any other funds they may have are stolen. The whole point of them leaving China is leaving while they still can. Canada's dumshit politicians will take anyone that has a bundle of cash and claim to be entrepreneurs. These people stay long enough to be called landed immigrants. As a result of this status they now have a home base away from China. This happens over and over again.
The police are never listened to and the only people happy are the
real-estate people and our dumshit politicians.
A 1955 two level home (fixit upper) now sells for a minimum 1.2 million dollars in Vancouver. The upward pressure on prices is rediculous on every house. Shaughnessy in Vancouver is mostly all Chinese. Not all are crooked but most are of dubious back ground.
Mayor moon beam the mayor of Vancouver has a Chinese girlfriend which that alone is okay but her mother was arrested in China and is kind of anxious to leave and come to Canada. You can see the problem every country has. We've all been sold out as supreme suckers and now have to live with them.
Welcome to Canada the land of the free.