U.S. Expands Coverage of Real Estate Anti-Money Laundering Program

U.S. Expands Coverage of Real Estate Anti-Money Laundering Program

November 4, 2018

New requirements lower the cash threshold and add more metropolitan areas

The U.S. Treasury Department said this week it has expanded an anti-money-laundering data program that requires title insurance companies to reveal the owners of shell companies buying luxury real estate.

The changes lower the value threshold of potential acquisitions subject to the requirement and expands the coverage to five new cities.

Shell-company real estate deals are legal, but they’re attractive to money launderers because a deal can be made anonymously and the buyer doesn’t have to explain the origin of the funds used. The industry largely has avoided regulatory scrutiny over its risks of money laundering until recent years.

Leaders looking to hide money stolen from their countries, human traffickers and other criminals have bought property in the U.S. using these types of companies to legitimize their ill-gotten gains, analysts say. Law enforcement has seized property ranging from Las Vegas apartments to South Florida mansions in their pursuit of laundered money through real estate.

The program, called a geographic targeting order, was launched in January 2016 and is subject to renewal every six months. As of Thursday, the order requires title-insurance companies to file reports to the federal government on “all-cash purchases” through limited liability companies of $300,000 or more of residential property in 12 metropolitan areas. Previously, the value threshold had varied by city and the program covered seven cities, as well as some surrounding counties.

“Reissuing the [geographic targeting orders] will further assist in tracking illicit funds and other criminal or illicit activity, as well as inform [Treasury’s] future regulatory efforts in this sector,” the Treasury said in a statement.

The new order covers purchases made, at least in part, using cash or a cashier’s check, certified check, traveler’s check, personal check, business check, money order, funds transfer or virtual currency. It involves deals made in the metropolitan areas of Boston, Chicago, Dallas-Fort Worth, Honolulu, Las Vegas, Los Angeles, Miami, New York, San Antonio, San Diego, San Francisco and Seattle.

After the program first went into effect, all-cash purchases by companies dropped nationally by about 70%, even in areas not subject to the requirements, according to a paper from economists at the Federal Reserve Bank of New York and the University of Miami.

An effort to nationalize the program was included in a bill in Congress that imposed sanctions on Russia. But lawmakers said this week the clock is running out and the legislation may not pass in time.

Sources: Wall Srreet Journal