Monday, December 11, 2017
Business

Too little, too late? Feds aim to ID buyers of real estate hiding behind shell companies

Got to hand it to the feds. You just can't get anything by them.

Pause for laughter.

A new rule took effect this month aimed at ending the secrecy of people who buy real estate via anonymous shell companies. Finally, it seems to have dawned on U.S. Treasury Department officials that this type of property transaction — in which the buyer is listed merely as a "Fill in the Blank LLC" — might be an effective way to invest ill-gotten gains and launder money without having to identify the purchasers.

"We are seeking to understand the risk that corrupt foreign officials, or transnational criminals, may be using premium U.S. real estate to secretly invest millions in dirty money." That's what Jennifer Shasky Calvery, the Treasury's director of the financial crimes enforcement network (known as FinCEN) said when announcing the new rule.

In the spotty world of antimoney-laundering initiatives, this effort again smacks of too little, too late.

First off, the rule is temporary and only applies geographically to certain high-end real estate deals done only in Manhattan and Miami. Buyers in Tampa Bay can continue to do what they want. For now.

Under the rule, title insurance companies for the next six months must file information with FinCEN on the owners of a shell company making an all-cash purchase of real estate. The targeted transactions involve property of more than $1 million in Miami and more than $3 million in Manhattan.

The loopholes are glaring. Real estate buyers seeking privacy can easily avoid prying federal eyes by structuring their property purchase to avoid FinCEN's tracking criteria — for instance, by taking on a small mortgage instead of paying all cash. Or they can simply buy property somewhere other than Manhattan or Miami.

Like here, where property acquisitions in the name of no-name shell companies have long been common.

The FinCEN order does not permit the feds to collect data on wire transfers. Yet transfers are a common method of moving money used in large-dollar real estate deals. The rule also applies only where at least some of the proceeds are paid in currency or bank checks, traveler's checks or money orders.

To be fair, this limited federal effort may yet blossom into a more comprehensive crackdown on shell company real estate deals.

"This is only the start," FinCEN's Calvery insisted at a recent Miami antimoney-laundering conference of the Florida International Bankers Association. Under the Patriot Act, the Treasury can impose antimoney-laundering rules on property transactions. So far, lobbying by the powerful real estate industry has limited tougher sanctions out of concern that revealing the names of luxury property owners will have a chilling effect on real estate markets.

Buying homes or commercial buildings via a shell company does not automatically mean dirty money is involved. Shell company "LLCs," limited liability corporations, are increasingly popular with wealthy buyers, especially international buyers eager to keep secret from their own governments or even potential kidnappers any U.S. real estate investments. Shell company deals also can be used to limit legal responsibility and manage or even hide tax exposure.

Shell companies also happen to be in vogue, appealing to those well-off property buyers who simply want to keep their names out of the public spotlight.

The problem, as FinCEN's new rule suggests, is that the rapid rise of anonymous shell corporations makes it hard to know if buyers are simply shy or engaging in criminal acts to hide dirty money.

The Miami Herald reports that real estate buyers in Miami-Dade paid cash for more than 1,150 homes priced at $1 million or more last year, according to EWM Realty International. That means cash deals accounted for 60 percent of home sales valued at more than $1 million.

A recent New York Times investigation revealed the high frequency of using shell companies in luxury real estate deals. In Manhattan, 39 percent of condos purchased since 2008 for more than $5 million involved shell companies hiding the identity of the buyers, the newspaper found. By 2014, the share of hidden buyers of luxury properties had soared to 54 percent.

For all the concerns of law enforcement officials that shell companies can hide illicit gains, the New York Times reported last year, regulatory efforts to require more openness from these companies have failed.

"We like the money," Raymond Baker, the president of Global Financial Integrity, a Washington nonprofit that tracks the illicit flow of money, told the New York Times. "It's that simple. We like the money that comes into our accounts, and we are not nearly as judgmental about it as we should be."

In many of Manhattan's premier condo towers, a majority of the properties are owned by shell companies. For example, the New York Times found that 57 percent of the units in Trump International are owned by nameless shell companies.

Similar percentages of real estate deals transacted by shell companies are also typical in Los Angeles and San Francisco.

In January, the Miami Herald reported that a Key Biscayne mansion had just sold for a whopping $47 million. The buyer? A Delaware-based shell company named Boca Breeze. The actual owner is unknown.

Given today's security-conscious climate and the global flow of vast sums of money from who knows where, maybe it's time for such secrecy to end.

Contact Robert Trigaux at [email protected] Follow @venturetampabay.

Comments
JW Marriott Clearwater Beach project still on target despite some bumps

JW Marriott Clearwater Beach project still on target despite some bumps

CLEARWATER BEACH — While Tampa is excited about its first JW Marriott hotel, plans are moving ahead for a $130 million JW Marriott property on Clearwater Beach, despite some hiccups. "We’ve done really well in our opinion," Uday Lele, developer of t...
Updated: 27 minutes ago
Tampa Hillsborough Expressway Authority plays beat the clock on GOP tax bill

Tampa Hillsborough Expressway Authority plays beat the clock on GOP tax bill

TAMPA — With the Republican tax bill poised to eliminate the opportunity, the Tampa Hillsborough Expressway Authority on Monday said it had refinanced a big chunk of its debt to save money in the future.The authority borrowed $152 million from the bo...
Updated: 1 hour ago
HSBC says U.S. will dismiss criminal charges against it

HSBC says U.S. will dismiss criminal charges against it

HSBC said Monday that U.S. authorities were preparing to dismiss criminal charges against the bank, five years after it reached an agreement to avoid prosecution related to lapses in its money-laundering controls.In 2012, the bank, one of the world’s...
Updated: 2 hours ago
Major auto manufacturer offers longer hours, incentives to fix airbags

Major auto manufacturer offers longer hours, incentives to fix airbags

TAMPA — With nearly 200,000 people around Tampa Bay still driving around with defective airbags that could kill them, a major automaker is trying to dramatically cut that number down this week.Fiat Chrystler Automobiles U.S. has launched Airbag Recal...
Updated: 2 hours ago
This 6-year-old kid made $11 million in one year reviewing toys on You Tube

This 6-year-old kid made $11 million in one year reviewing toys on You Tube

When most people think back on the child celebrities of their time, they likely think of child movie actors, the well-trained stars of showbiz. For some, these were stars like Mary Kate and Ashley Olson, or Macaulay Carson Culkin from "Home Alone." F...
Updated: 3 hours ago
Ticket-fighting firm hires former Florida Bar president to sue the Bar

Ticket-fighting firm hires former Florida Bar president to sue the Bar

Times Staff WriterWell, this is awkward. A company that is suing the Florida Bar has hired a former Bar president to represent it. Ramon Abadin has joined the legal team of TIKD, a company that expedites the process of fighting traffic tickets in Pin...
Updated: 6 hours ago
Tampa: Hundreds protest Trump’s decision on Jerusalem

Tampa: Hundreds protest Trump’s decision on Jerusalem

TAMPA — Hundreds rallied near the University of South Florida on Friday night to protest President Donald Trump’s recent declaration that the United States will recognize the divided city of Jerusalem as the capital of Israel.The protest was organize...
Published: 12/08/17
Updated: 12/09/17

Duke outage leaves 7,700 without power near Pinellas Park

PINELLAS PARK — Up to 7,700 customers across Pinellas Park, Lealman and Kenneth City lost power in a Thursday night outage, according to Duke Energy.The outage impacted a cloverleaf-shaped area of customers, with pedals extending in the cardinal dire...
Published: 12/08/17
Express lanes set to open on Veterans. They’re free -- for now.

Express lanes set to open on Veterans. They’re free -- for now.

TAMPA — Drivers on the Veterans Expressway will gain an extra lane from Gunn Highway to Hillsborough Avenue starting Saturday.But there’s a catch: Once drivers enter the lane, they won’t be able to leave it — not until a designated exit about six mil...
Published: 12/08/17
St. Petersburg chamber of commerce charts ‘Grow Smarter’ economic development strategy

St. Petersburg chamber of commerce charts ‘Grow Smarter’ economic development strategy

Times Staff WriterST. PETERSBURG — What started more than five years ago as an exploratory conversation among a handful of business leaders blossomed Friday into a full-blown community discussion of how to nurture business while working to make sure ...
Published: 12/08/17