The Treasury Department is turning up its efforts to weed out money laundering in residential real estate deals.
The department proposed a rule this week that would require real estate professionals to disclose the names of those using limited liability companies and shell companies to shield their identities in all-cash transactions, the Wall Street Journal reported. The disclosure would be required regardless of purchase price, an evolution from the targeting of luxury buyers.
The Financial Crimes Enforcement Network, the Treasury’s arm targeting money laundering, already has “geographical targeting orders” in place. The latest proposal requires title insurance companies to report on beneficial owners of LLCs in all-cash deals above a certain threshold in markets like Miami and Manhattan.
The responsibility for filing disclosures would typically fall upon the settlement agent, though title insurance agents, escrow agents and attorneys could also be tasked with the disclosures. The information would then be held by FinCEN in a database available to law enforcement.
FinCEN’s top priority is to raise awareness of the rules under the Bank Secrecy Act, planning to enforce only willful violations at first.
Rules are also being considered for commercial transactions, according to a senior FinCEN official.
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Some buyers hide behind shell companies to protect their identities or shield themselves from litigation. Others, however, take advantage of their secrecy to launder money. Treasury Secretary Janet Yellen previously claimed up to $2.3 billion was laundered through real estate in the United States between 2015 and 2020.
Last year’s dramatic mortgage rate rise incentivized more homebuyers to avoid loans when possible. In September, more than one-third of all home purchases in the country were made in all-cash, the highest share of such deals in close to a decade, according to Redfin.
— Holden Walter-Warner