U.S. to track secret buyers of luxury real estate. How about Vancouver? How about Canada?

New York City 2004(Preamble: The New York Times reported on January 13, 2016 that the U.S. Will Track Secret Buyers of Luxury Real Estate, as a part of their ongoing coverage of secret buyers of prime real estate. How about Canada? It has long been known that Vancouver and other municipalities accept applications by numbered (shell) companies. (Vancouver City Hall often shields the identities of proponents and principals in rezoning and development applications. Even the Mayor’s previous house was owned by a numbered company.) We believe that visionary policy makers at all levels, including municipal government, could have and should have been ahead of the curve and in tune with the drivers of housing market affordability. Especially those who have for over a decade professed their dedication to housing affordability? Why was this kind of policy now being adopted in the United States not advocated by candidates in the 2008, 2011, and 2014 civic elections? And it’s not just the national government taking action. So is New York City. How about Vancouver now? Below are excerpts of salient parts of the NYT article. Please visit the source for the full text.)

U.S. Will Track Secret Buyers of Luxury Real Estate (by Louise Story, New York Times, 13-Jan-2016)

NYT photo caption: Condominiums at the Time Warner Center were found to have a number of hidden owners over a decade who had been the subjects of government investigations.

Excerpts: Concerned about illicit money flowing into luxury real estate, the Treasury Department said Wednesday that it would begin identifying and tracking secret buyers of high-end properties.

The initiative will start in two of the nation’s major destinations for global wealth: Manhattan and Miami-Dade County. It will shine a light on the darkest corner of the real estate market: all-cash purchases made by shell companies that often shield purchasers’ identities.

It is the first time the federal government has required real estate companies to disclose names behind all-cash transactions, and it is likely to send shudders through the real estate industry, which has benefited enormously in recent years from a building boom increasingly dependent on wealthy, secretive buyers.

The initiative is part of a broader federal effort to increase the focus on money laundering in real estate. Treasury and federal law enforcement officials said they were putting greater resources into investigating luxury real estate sales that involve shell companies like limited liability companies, often known as L.L.C.s; partnerships; and other entities.

Officials said the new government efforts were inspired in part by a series last year in The New York Times that examined the rising use of shell companies as foreign buyers increasingly sought safe havens for their money in the United States.

The use of shell companies in real estate is legal, and L.L.C.s have a range of uses unrelated to secrecy. But a top Treasury official, Jennifer Shasky Calvery, said her agency had seen instances in which multimillion-dollar homes were being used as safe deposit boxes for ill-gotten gains, in transactions made more opaque by the use of anonymous shell companies.

We are concerned about the possibility that dirty money is being put into luxury real estate,” said Ms. Calvery, the director of the Financial Crimes Enforcement Network, the Treasury unit running the initiative. “We think some of the bigger risk is around the least transparent transactions.”

The department will focus on sales that are both paid for all in cash and conducted using shell companies. The government is requiring title insurance companies, which are involved in virtually all sales, to discover the identities of buyers and submit the information to the Treasury. The government will put the information into a database for law enforcement.

… Real estate professionals, especially in the luxury market, often know little about buyers, and until now, they have not been legally required to. 

…. last spring, New York City’s Finance Department began requiring shell companies buying real estate to report their members to the city. That rule, however, is less far-reaching than the Treasury action.

Real estate is becoming a larger target for law enforcement as well. According to two people with knowledge of cases at the Justice Department, lawyers there will be shaping cases directly around money laundering in real estate deals rather than adding such transactions to other cases, also partly in response to The Times’s series. The Federal Bureau of Investigation is also creating a new unit to focus on money laundering, and real estate will be a central emphasis, according to two people with direct knowledge of the matter.

… The Treasury is looking for the actual owners behind shell companies, often referred to as the beneficial owners. “We’re not looking for nominees,” Ms. Calvery said.

… In its order, the Treasury defined beneficial owners as “each individual who, directly or indirectly, owns 25 percent or more of the equity interests” of the entity that bought the property. Once title companies identify those people, they are required to copy driver’s licenses or passports and also pass the individuals’ names to the Treasury Department.

See the full article online.

U.S. Will Track Secret Buyers of Luxury Real Estate (by Louise Story, New York Times, 13-Jan-2016)



The full New York Times Series is available online.

Articles in this series examine people behind shell companies buying high-end real estate.
Part 1
Time Warner Center: Symbol of the Boom
READ IN CHINESE / 点击查看本文中文版 »
Part 2
The Mysterious Malaysian Financier
READ IN CHINESE / 点击查看本文中文版 »
Part 3
The Besieged Indian Builder
Part 4
The Mexican Power Brokers
Part 5
The Russian Minister and Friends
Part 6
The Brooklyn Deed Thieves
Part 7
A Mansion, a Shell Company and Resentment in Bel Air

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