Feds: "We Come Across Real Estate Being Purchased With Illicit Funds Once Every Other Case"

Tyler Durden's picture

The latest note out of real estate expert Mark Hanson points to something we have discussed since 2012: the use of US real estate to park "hot" and in some cases illegal foreign capital in US real estate courtesy of the NAR's exemption from anti-money laundering regulations. Some of the highlighted observations are stunning.

Higher-End REAL ESTATE TROUBLE Worsens (From New York to Florida to California), by Mark Hanson of M Hanson Advisers

In Feb. 2016, the Treasury's FinCEN enacted "GEOGRAPHIC, ANTI-MONEY-LAUNDERING, TARGETING ORDERS of 2016".

Apparently, the program worked out so well, in August '16, it was expanded to cover the rest NYC and SoFL, in addition to the LA, San Diego, San Fran Bay Area, and San Antonio regions. Regarding the expansion, on July 28, 2016, I put out a note entitled "7-28 Hanson...Higher End Real Estate's Coup De Grace...Heads-Up,." copied at the bottom of this note, highlighting what I perceived to be the fall-out.

Everybody assumed this program would end organically last month, but it was renewed for another year, which wasn't widely reported.

THESE STATEMENTS BY INVESTIGATORS ARE OMINOUS, especially considering that "foreign and domestic fraud and money laundering" was one of my "four pillars of unorthodox housing demand", over which I have pounded the table for the past several years.

"We don't come across [money laundering in real estate] once every 10 or 12 cases," John Tobon, U.S. Homeland Security Investigations Deputy Special Agent in Charge for South Florida, told the Miami Herald in January. "We come across real estate being purchased with illicit funds once every other case." 


"FinCEN said that 30 percent of reported transactions across the nation were linked to buyers who had been flagged by banks and other financial institutions for suspicious activity."

Well, this is one way to narrow the ever-increasing divergence between higher and lower end real estate prices...blow-up the higher end.

I don't find it any coincidence that the era of ASPIRATIONAL PRICES in the middle-high to luxury segment ended abruptly in early 2016, in lock-step with this program ramping up, as evidenced by headlines of 20% to 40% list price haircuts reported constantly - most recent is Mickey Drexler's $35M to $19.95M haircut -- in exactly the markets, which the program targets.

There is such a thin pool of demand for middle-high to luxury real estate, that if one demand cohort goes away (fraud, or suspicious purchases by LLC's, for example), and some "innocent others", who simply don't want the Treasury tracking them, "move to the sidelines", it will create a massive hole in demand and pricing power.

It only takes a few real estate transactions to "reset" entire markets, higher and lower, and establish new trends before most everybody else (headline readers) without access to real-time, transactional data even realizes it.

Region's being tracked now are listed, as follows. The price triggers aren't too high. Heck, $2mm may not even get you a quarter-acre dirt in Palo Alto.

  • New York: Manhattan with a threshold at $3 million; Brooklyn, Queens, Bronx, and Staten Island at $1.5 million.
  • Florida: Miami-Dade County, Broward County, and Palm Beach County, all at $1 million.
  • California South: San Diego County and Los Angeles County;
  • California North: San Francisco, San Mateo County, and Santa Clara County, all at $2 million.
  • Texas: Bexar County (San Antonio area) with a threshold of $500,000.

Small leaks in large bubbles can turn into rips very easily. Which makes it critical for high end owners, investors, and speculators, that the remaining "three pillars of unorthodox demand", which I am tracking closely, don't fail (some already are).

The article referenced is by Miami Herald covers the renewed GTO for 2017:

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Deathrips's picture

YOU hear that PLEBES!!


Its not the artificially low interest rates and fiat money.


Its criminals...



Mercury's picture
Feds: "We Come Across Real Estate Being Purchased With Illicit Funds Once Every Other Case"

No shit.

Try opening up a $50k brokerage account at JP Morgan...and you'll get a microscope up your ass.

But you can buy a $10mm condo in NYC for cash, no questions asked...

Consuelo's picture



Economies of scale, my dear man...  

evoila's picture

They may want to add Seattle and Bellevue. Out of control there.

Yes We Can. But Lets Not.'s picture

Add Orange Co., CA.

My sister sold her $1.5MM place in Laguna to a nasty Chinese piece of work 4 years ago.  They already flipped it for nice six figure gain.

AlaricBalth's picture

Miami is rife with flight capital from South and Central America.

Chupacabra-322's picture

Why do you think OJ lived here. No State Income Tax & you can declare a Homestead Excemption on your home.

Antifaschistische's picture

"We come across real estate being purchased with illicit funds once every other case." 

So...if a man (what I call) steals money from his foreign corporation...which borrowed 100 million from their "banks", which is just fiat CB dollars.....and then he takes $15 million and goes to San Marino California and pays cash for three homes...is that "illicit" funds?

It probably ISN'T considered "illicit" even though these people are effectively stealing from their home corporations, domestic banks...and eventually every citizen of their home country as inflation/printing becomes the cure to their bankruptcy.

In the meantime, their wives and kids still roam the streets of Pasadena seeing how much money they can spend in every high end shop while the valet parks their Mercedes S550.

...and if I seem bitter I am.   Because unlike many ZH'ers, I'm not a China basher.  China is full of people that work their asses off to try and improve their lives....and they are all being robbed by the VIPs who use these "licit or illicit" funds to gobble up the best real estate in America. (I am pissed about that)   And they get 100% complicity from the US National Association of Realtors who buy off local/state/fed .gov officials.

asteroids's picture

Play Vancouvers favourite game "Crack Shack or Mansion"

Luc X. Ifer's picture

You forgot Toronto, which dethroned Vancouver as top money laundering scheme soon after the foreign buyer tax was introduced. Toronto housing bubbled so bad in just few months that BMO and RBC had to declare it officially a speculation market and the gov to change direction after declining it and admit that foreign buyer tax is a must in Ontario also.

sgt_doom's picture

EB-5 monies (money from China), Russian mob money, and then the usual money laundering . . .

QQQBall's picture

outlaw private ownership of RE. problems solved.




Uncle Sammy

Mercury's picture

No. It's more like 'Patriot Act' (which the Feds should be aware of) and the incentives contained therein.

Logan 5's picture
Logan 5 (not verified) Mercury Mar 13, 2017 12:35 PM

Sessions will get to those outlaws just as soon as he throws the last of the pot smokers in a private prison.

Chupacabra-322's picture

@ Mercury,

"Once every other case."

"She's only a little pregnant."

See the difference? There is none.

divingengineer's picture

But you can buy a $10mm condo in NYC for cash, no questions asked...

Only if you are a foreigner. 

07564111's picture

We can fix that by banning cash and confiscating your Gold and Silver

Bastiat's picture

Miami: the most important city in central america.

ejmoosa's picture

Wait a second?  You mean that no one thought all those dollars that flowed out of the nation would come back and buy up our hard assets such as real estate?

We have so much debt out there that we could probably be bought out of our own communities.

rahrog's picture

BINGO!!!, ejmoosa!!!


This part of the ongoing fiat money scam is just another way to fuck over the middle class of America.



TAALR Swift's picture

Not Putin, not Russia.


What ya gonna do now?  

voxale's picture

If the Chinee stop buying, Cali will be in deep doo doo. 

VD's picture

the gov itself along with IRS is the FRAUD. what really is illicit in a giant centrally planned ponzi? think about that....

junction's picture

Obviously, the Feds must investigate money laundering real estate transactions at the Trump Tower.  Have U.S. Attorney Bharara investigate this high profile case.  Oh, wait. . .

Bill of Rights's picture

" But well gladly take those funds, because after all Cash is untraceable "...MORE hypocrisy!

Amy G. Dala's picture

And p.s. "flagged by banks for suspicious activity,"  i.e., and cash transaction over $10k, or any "suspicious transaction" under $10K.

So to summarize:  all cash transactions are suspicious.

Amy G. Dala's picture

Wait a minute.  Domestically laundered dollars are a bad thing, but foreign laundered dollars are a good thing.  Who gives a shit where the money is coming from or whether or not it was generated legally or taxed, so long as it comes here.

The day these monies go looking for better markets, then we are in rilly big trouble.

espirit's picture

Tougher for the Feds to confisgate foreign owned properties, especially those in either communist or those with diametrically oppossed governments.

In leu of confisgation, other avenues of prosecution have to be explored such as income tax aversion, which takes more resources.


It's just easier to shake them down for all they can, and call it a win.

divingengineer's picture

Who's in big trouble?

The Shylocks maybe. I'll enjoy lower prices. 

chosen's picture

No shit sherlock.  I have been saying for the past two years that Chinese are laundering their money in US real estate.  I see it where I live.  It actually started five or so years ago.  What do you think is propping up real estate prices?  High incomes?  High prices?  Quality homes?  No, the answer is chinks.  Confiscate the property and deport the foreign buyers if you can find them.  In any case, arrest the realtors that sold the homes.

Consuelo's picture



The Chinese simply do what Chinese have always done throughout the centuries.


But they cannot do it without a willing accomplice.


From the Lincoln bedroom, to Loral gyroscopes, to Los Alamos laptops and all the Sandy Burgers in between - it's takes (2) willing parties.

voxale's picture

You're kidding right? I want these clowns to keep over bidding for property so i can sell my 2000 sq ft condo in Cupertino for 2 mil. Then you can do what ever you want to them.  (Maybe 2 mil is too low. Make it 20 mill! That's the ticket!)

FreeShitter's picture

Like how you fucks bought cl futures with illicit funds awhile back huh? Just keep printing janet, nothing will ever happen right?

mary mary's picture

The more the FED steals everyone's savings, the more ways everyone finds to "launder" their savings.  And then, the more "police state" agencies the FED creates to "catch all those nasty criminals".  The FED is the biggest terrorist enterprise in USA history.

Consuelo's picture



Isn't the President suppsosed to host Xi at Mar a Lago fairly soon...?

Moe Hamhead's picture

Yeah, he's hoping to sell for a good profit!

Youri Carma's picture

To make it clear that Wall Street's fraud business model is exclusively for them. The rest can eat cake.

roadhazard's picture

The Feds money at work.

vegas's picture

Just another reason to not have anything in the U.S., because sooner or later ... to save the children ... they will be taking your money & wealth as well. It's just a matter of time and whose OX is getting gored, but when they come for your money, just remember who you voted for and why, cuz they are all thieves.



Buckaroo Banzai's picture

This has been going on for at least a decade, and arguably since the late 90s. The Feds have obviously known about it all along but have done nothing. Now, they are doing something. Which means the "dump" button is being hit on the old Pump 'n' Dump. Why now, exactly? Where is the crooked money going now? It has to have someplace to go--when you're swinging through the jungle, you never let go of one vine without having another to grab onto first. "The Spice Must Flow".

Money_for_Nothing's picture

Because things are getting serious? Everyone here checks the Baltic Dry Index to see how international trade is going. Not going well. Why raise interest rates now? Because the banks need to be recapitalized and there isn't any cash flow to tax? Capital is trying to escape China. Allowing it to flow into real estate doesn't help banks. Don't have a guess as to where the excess dollars will flow. Stocks and bonds? Saving accounts? Money markets?

ICValue's picture

Money is money, it is the words on paper that make it illegal.

coast1's picture

it doesnt come from the CIA afghan opium/heroin, they dont invest that money in real estate, they invest it on spying on us and bombing other countries.

Ghost of Porky's picture

More propoganda for the big cash ban.

espirit's picture

Yeah, the little hackers are prosecuted to the fullest extent of (cough, cough) authoritarian laws, while the Big Boyz Toyz go unnoticed.

Ayn Rand was right, much to my dismay.

24Richie's picture

To be a reported FinCEN transaction it must meet the followign requirements:

All cash

Over 2 million

Buyer is an entity (LLC, partnership, etc)

Funds come in some form OTHER than a wire


artichoke's picture

So you can just carry cash to a foreign bank, deposit it, and then wire it to close your US real estate purchase to evade this?