Real Estate
Real estate markets open to criminals and the corrupt
Real estate is a favorite way for the corrupt and the criminal to spend and stash their money.
From luxurious residences in New York, London, and Miami to commercial buildings in America’s heartland, real estate offers kleptocrats and other criminals an easy, opaque asset class to launder their ill-gotten gains.
Moreover, when real estate is used as a safe haven for the proceeds from criminal activity, access to housing is reduced and ordinary residents struggle to afford properties for their family or business.
An August 2021 report by Global Financial Integrity (GFI) found that at least US$2.3 billion was laundered through U.S. real estate over the past five years. Alarmingly, buyers of residential properties are only required to report their beneficial owners in a small number of counties, and intermediaries do not have to report suspicious transactions to the authorities.
In fact, most countries lack publicly available property registers, with anonymous companies being used extensively to obscure the identities of the true owners. And few if any rules exist whatsoever to either shed light on the actors operating in the vast commercial real estate sector.
Recommendations for US policymakers
In a public comment to the Financial Crimes Enforcement Network (FinCEN) in February 2022, ACDC made the following recommendations for effectively combatting money laundering through U.S. real estate:
- Every real estate transaction in the United States of any financial value, cash or financed, should be covered by the reporting requirements set by FinCEN.
- FinCEN should collect basic sales information as well as beneficial ownership information for the buyer and seller of every piece of real property in the country, both residential and commercial.
- FinCEN should collect this information primarily from title insurers for residential property and from escrow agents for commercial transactions.
- When these professionals are not involved in a transaction, attorneys (limiting them to their closing function) and real estate agents should also be required to collect and report basic sales and beneficial ownership data.
- To ensure proper enforcement of these rules, FinCEN must allocate sufficient resources to conduct direct examinations of high-priority covered businesses and allocate sufficient staff to analyze the data produced by its program.
Our Work on Real Estate
Statements
ACDC to FinCEN: Make U.S. real estate market one of the most transparent in the world
In response to a call for public comments on proposals for combatting money-laundering in the US real estate ...
Reports
The impact of beneficial ownership transparency on illicit purchases of US property
In 2016, the US government started requiring that corporate all-cash buyers of residential real estate declare their beneficial owners. In this working paper, we analyze the effectiveness of the policy using data from Zillow on millions of transactions. Our results show the reform had no deterrent effect on corporate all-cash purchases in the 20 targeted counties.
Statements
Wide-reaching regulation and tough enforcement critical for protecting U.S real estate from illicit funds
The Anti-Corruption Data Collective (ACDC) has urged the Financial Crimes Enforcement Network (FinCEN) to massively scale up its coverage of the real estate sector and its enforcement of suspicious property deals.
Members working on this problem
