US to crack down on high-end real estate purchased with 'dirty money'

The US government on Wednesday announced a crackdown on corrupt foreign officials and international criminal masterminds buying up multimillion-dollar Manhattan apartments with “dirty money”.

Jennifer Shasky Calvery, director of the Financial Crimes Enforcement Network (FinCEN), a branch of the Treasury, said “all cash” buyers of high-end properties would be forced to reveal the true “beneficial owner” and would no longer be able to hide behind a string of shell companies.

“We are seeking to understand the risk that corrupt foreign officials, or transnational criminals, may be using premium US real estate to secretly invest millions in dirty money,” Calvery said.

Geographic targeting orders (GTOs) will require title insurance companies – which hold a register of companies’ owners – to identify the “natural persons” behind shell companies used to pay cash for properties worth more than $3m (£2m) in Manhattan and $1m in Miami-Dade County, the nation’s second-biggest centre of overseas investment in property.

FinCEN said the information gathered in the GTOs would advance law enforcement’s ability to identify the “natural persons” involved in transactions “vulnerable to abuse for money laundering” and make it easier to secure money-laundering convictions. However, the orders are only operating on a trial basis between March and the end of August.

The move comes as the US government prepares for a court battle next week to seize control of multimillion-dollar Manhattan apartments bought by Russian fraudsters via offshore shell companies. The scheme was exposed by Russian lawyer Sergei Magnitsky, who was arrested after filing a complaint and died in prison.

The US Department of Justice’s filing says: “Russian criminal organization including corrupt Russian government officials defrauded Russian taxpayers of approximately 5.4 billion ruble ($230m) through an elaborate tax refund fraud scheme. After perpe­trat­ing this fraud, mem­bers of the Orga­ni­za­tion have under­taken ille­gal actions in order to con­ceal this fraud and retal­i­ate against indi­vid­u­als who attempted to expose it.

“As a result of these retaliatory actions, Sergei Magnitsky, a Russian attorney who exposed the fraud scheme, was falsely arrested and died in pretrial detention.”

The filing adds: “Members of the organization, and associates of those members, have also engaged in a broad pattern of money laundering in order to conceal the proceeds of the fraud scheme. This money laundering activity has included the purchase of pieces of Manhattan real estate with funds commingled with fraud proceeds.”