It used to be easy being a corrupt megarich plutocrat: when the time came to launder your filthy lucre, you just bought the most ridiculously expensive penthouse you could in NYC or Miami and kept your investment safe there until you decided to flip the place for a tidy profit. You didn't even have to see your name in the news—by hiding behind a shadowy LLC, you could pay cash for real estate and bleach your blood money clean without any risk of exposure. Then some jealous journalists started blowing everyone's cover.
Last year the Times published a multi-part investigation into foreign buyers who use shell companies to buy real estate in cash; these investments create "safe havens" for extremely affluent individuals who may have made their money dubiously back in their home country. Or sometimes wealthy foreigners simply want a reliable investment while they wait out political unrest back home. In Miami, where realtors have enjoyed a long luxury housing boom thanks to buyers from South America and China, they call it "flight capital."
Many of these homes remain unoccupied for most the year, sometimes longer. The expensive purchases drive up housing costs, while the foreign owners pay very little in property taxes, and contribute nothing to the everyday commerce of the city.
All of this is abetted by their anonymity—which the Times went to great lengths to expose, finding that the Time Warner Center, for example, has many units owned by people like the Indian mining magnate accused of illegally dumping "arsenic-bearing slag."
Today the Treasury Department's Financial Crimes Enforcement Network announced that it will start identifying and tracking secret buyers of properties who pay $3 million in cash or more in NYC or $1 million or more in Miami. Title insurance companies will be required to notify the identities of the buyers, which investigators will compile in a database. The requirement is temporary, from March through August, but if it gets results, it could be extended nationwide. The rule change will affect billions of dollars in real estate transactions.
"Repeated anecdotal information where we see criminals of different stripes putting money into real estate all suggest to us that this is an area we need to pay attention to," Treasury official Jennifer Shasky Calvery told the Times. "We are concerned about the possibility that dirty money is being put into luxury real estate. We think some of the bigger risk is around the least transparent transactions."
