Feds renew crackdown on dirty money in Miami real estate

Feb 23, 2017   

February 23, 2017
By Nicholas Nehamas

After months of “will-they-or-won’t-they” speculation, the U.S. Treasury Department announced Thursday that it will extend its search for dirty money in six high-end real estate markets, including South Florida, for another six months.

The rules, initially imposed early last year as a temporary measure on Miami- Dade County and Manhattan, require shell companies buying expensive homes with cash to report their true owners to the Financial Crimes Enforcement Network (FinCEN), a Treasury agency. Law enforcement officials have said a lack of oversight allows criminals from around the world to launder money through luxury real estate in the United States.

In the weeks following the election of President Donald Trump — a former real estate developer — it was unclear if the new administration would continue the effort, which was set to expire on Thursday.

“This is an administration that says it is both pro-business and pro-law enforcement,” said Lee Stapleton, a South Florida attorney and former federal prosecutor. “This order shows that they’re not incompatible. … It’s not good for real estate or for business if illicit dollars are artificially inflating the market. And law enforcement doesn’t want real estate to be a safe haven for money laundering.”

The so-called geographic targeting order had already been renewed once before when it was also expanded to Broward and Palm Beach counties; the other four boroughs of New York City; Los Angeles County; San Diego County; the greater San Francisco area; and the county that includes San Antonio, Texas. The rules kick into effect at different price points depending on the market. In South Florida, home sales of $1 million or more are covered.

By extending the order rather than announcing a plan to craft permanent regulations that would apply nationwide, the Trump administration showed it has perhaps not made up its mind on whether to continue the crackdown long-term, said Andrew Ittleman, a Miami-based attorney who is an expert on anti-money laundering compliance laws.

“I wouldn’t read too much into the extension,” Ittleman said. “Trump was only inaugurated a month ago. To me, this is a sign the administration could be kicking the can down the road a little bit. … They have plenty of issues on their plate right now.”

The cities chosen for enhanced scrutiny all feature pricey real estate markets and an abundance of foreign buyers, a combination federal law enforcement officials believe make them prime targets for money laundering.

“We don’t come across [money laundering in real estate] once every 10 or 12 cases,” John Tobon, U.S. Homeland Security Investigations Deputy Special Agent in Charge for South Florida, told the Miami Herald in January. “We come across real estate being purchased with illicit funds once every other case.”

Money laundering fight

In a news release, FinCEN said 30 percent of reported transactions across the nation were linked to buyers who had been flagged by banks and other financial institutions for suspicious activity.

The agency has not said how many transactions have been reported or whether any have led to criminal investigations. Officials have described the rules as a temporary data-gathering activity meant to determine if money laundering in real estate deserves permanent national regulations.

“These GTOs are producing valuable data that is assisting law enforcement and is serving to inform our future efforts to address money laundering in the real estate sector,” FinCEN acting director Jamal El-Hindi said in a statement. “The subject of money laundering and illicit financial flows involving the real estate sector is something that we have been taking on in steps to ensure that we continue to build an efficient and effective regulatory approach.”

Some brokers and developers have worried the rules would affect sales — although a Herald analysis found that doesn’t appear to be the case — and criticized the government’s efforts as unnecessary and poorly designed. But a national trade group for the title industry said it supports the anti-money laundering push.

“Our members have collected this information for more than a year and the good news is those efforts appear to be beneficial to the government’s work identifying money laundering schemes and the illegal purchase of real estate,” Michelle Korsmo, chief executive officer of the American Land Title Association, said in a statement. “We continue to work closely with our members and FinCEN to collect the needed information as efficiently as possible.”

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