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Business/Finance See other Business/Finance Articles Title: Why financial criminals use real estate to launder money 15 comments Property is stable, functional, and less scrutinized than other landing spots for ill-gotten gains Special council Robert Mueller’s inquiry into Russian interference in the 2016 election has led to multiple charges of financial crimes for former Trump campaign chairman Paul Manafort. As the prosecution laid out in the ongoing trial this week, Manafort’s alleged criminal activity followed a common playbook—money laundering through real estate. Manafort is accused of laundering money he made while advising a pro-Russian regime in Ukraine by buying and renovating properties in the Brooklyn and Manhattan boroughs of New York City, the Hamptons, and Virginia. Real estate is often the preferred destination for a financial criminal’s ill-gotten gains for the same reason real estate is attractive to any investor: Real estate prices are generally stable and will appreciate over time. Real estate is also functional; a money launderer could use the property as a second home or rent it out, earning income from the investment. “You’re not gonna lose money on the transaction,” said Chris Quick, a former FBI agent who now runs a private investigation firm in South Carolina. “You buy a piece of real estate for a million, you’re gonna get rent on it or you’re hoping it’ll appreciate in value so when you sell 4 or 5 years down the road, you’re gonna make 25 percent on it. That’s one of the reasons why it’s attractive.” Real estate also offers a path to legitimacy that is more efficient than the purchase of stocks or other assets related to financial institutions. It’s also less subject to scrutiny—those institutions have a legal requirement to report suspicious activities. Buying real estate is the last step in what law-enforcement officials describe as a three-step money-laundering process. The first step is placement, when money launderers get their money into the financial system. For criminals whose money comes in the form of cash, this can be a long and involved process in which money mules make dozens of small deposits at banks so as to not attract attention. Layering is the process of setting up shell companies and offshore accounts to mask the identity of the “beneficial owner”—or the person who ultimately owns the company or money—of the accounts. When setting up a limited liability company (LLC) in states like Delaware, Nevada, and Wyoming, the owner doesn’t even have to list their name. They have to name a director and an agent, but that person can be anybody, and there are companies that exist simply to serve as director of LLCs where the beneficial owner doesn’t want to be named. “They’re just guys who literally sit in an office somewhere and take the mail for 10,000 companies, with just rows and rows and rows of P.O. boxes behind them,” said Brian Kindle, VP of product development at the Association of Certified Financial Crime Specialists. Money launderers will set up a web of these companies that make searching for the beneficial owner cumbersome and time consuming. Manafort is accused of having roughly $18 million, generated from his Ukrainian lobbying work, in offshore accounts that was then funneled into a web of shell companies. Integration, or moving the money into a venture that at first glance appears to be legitimate, is the final step of money laundering. With laundered money, some criminals will buy a bar, gentleman’s club, or laundromat that will also assist in laundering paper cash from illegal activity. They might also simply buy expensive goods like cars that they want to own. This is where real estate purchases come in. Manafort’s alleged money laundering landed in a number of different goods and services, including the now-famous ostrich jacket. His real estate purchases totaled $6.4 million. One of the primary advantages of laundering money through real estate is that you can move a lot of money in one transaction, particularly if you’re buying property in expensive markets like New York, San Francisco, and Miami, where money laundering through real estate is common. But probably the most advantageous aspect of buying real estate is that reporting requirements for suspicious activity are almost nonexistent, particularly compared to banks and financial institutions, which are legally required to blow the whistle on anything that looks fishy. A lawyer involved in a real estate transaction wouldn’t necessarily be required to flag a buyer who has funds in an LLC where the beneficial owner is masked. Furthermore, legitimately earned money from LLCs is often used to buy real estate in entirely-cash transactions, so these transactions aren’t even necessarily illegal. Some lawyers will flag it out of conscience, but others don’t. “Banks, securities broker/dealers, even precious metal dealers like gold or diamond sellers, a lot of other industries have anti-money laundering regulations on them,” Kindle said. “They’re going to ask me all kinds of questions. Most of the people involved in real estate, they don’t have to do any of that stuff. If I’m looking for anonymity, and I’m looking for a place where I can purchase and hold really high-value assets, real estate is a great place to go. It’s just outside the world of reporting obligations.” Because this process is so effective, money laundering is incredibly tough to catch in the United States. If the crime involves offshore accounts or companies, U.S. officials have to query the governments of those countries to get information. Those governments may take months to respond, if they do at all. When people are caught, it’s usually because they made a silly mistake, like using a personal email account to set up a company or using some other type of personal identifier. Prosecutors who sniff out money laundering in the paper trail usually still have to find a witness to testify that the alleged criminal made the transaction (see: Gates, Rick). “That helps you build the case,” Quick said. “You can have a transaction that looks bad but it could be totally legitimate. Normally with those, you can have a witness and documentation support that.” Post Comment Private Reply Ignore Thread Top • Page Up • Full Thread • Page Down • Bottom/Latest
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all of Joe Biden's homes, in photos
Interesting, thanks.
“The most dangerous man to any government is the man who is able to think things out... without regard to the prevailing superstitions and taboos. Almost inevitably he comes to the conclusion that the government he lives under is dishonest, insane, intolerable.” ~ H. L. Mencken
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