The U.S. Treasury Department is extending its all-out attack to stop money laundering. Federal regulators are eyeing high-priced housing markets such as Miami and New York in their operation. Their goal is to limit activities that misuse shell companies as a mean to launder money.
The decree was first announced in January 2016 in revelation of the Panama papers. Since then, it was renewed and more areas are included inside the jurisdiction. Shell companies that are buying properties over $1 million are subject to the decree. The new regulation requires buyers to confirm his or her share of ownership using a legal form of ID. Plus, insurers must be made by the name of the person who owns the company. This new initiative is targeted to address the loophole of LLC where buyer’s name is undisclosed.
For example, Condoideas Realty Group just closed a property for $1.2M at Brickell Heights. The buyer purchased under a company he had just created and it was a cash deal. He is a very reputable client but under the new regulations, the title company had to require from him the name of the owners of the company, their date of birth, their occupation and their address as well as their passports.
Before the decree was made, the main challenge was to regulate cash payment. Two-third of foreigners were financing their purchase via cash. What’s new in this extension is that the new regulation provides The Financial Crimes Enforcement Network (FinCEN) the authority to monitor wire transfers, which is the most popular method of cash payment. This is a huge step to close the loophole as most cash transactions were done via wire but the wires were previously exempt from the requirements.
FinCEN is also advising real estate agencies to play an active role of informant by reporting suspicious activity to them. According to the federal law, no act of crime can go ‘willfully’ unreported. Types of clients to be aware of are a) those who disregard property value or that are willing to overpay; b) those who want to buy above their means; c) those who do not care about the condition of the property they are buying and d) those who seek over-secrecy and demands record alteration.