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High-end, all-cash home purchases to be targeted by feds looking for money launderers

| Wednesday, Jan. 13, 2016, 7:54 p.m.

WASHINGTON — Suspecting that criminals may be hiding their ill-gotten gains in luxury real estate, the federal government Wednesday announced a new strategy to identify the secret buyers.

The effort by the Financial Crimes Enforcement Network, a unit of the Treasury Department, is aimed at lifting the veil on shell companies that often use all-cash purchases to snap up high-end residential real estate.

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

Treasury issued Geographic Targeting Orders that will require some title insurance companies to identify the individuals behind companies that pay cash for expensive homes in Manhattan and Miami-Dade County, two areas that officials say are hotbeds for such deals. Sales in excess of $1 million will be targeted in Miami-Dade, and in excess of $3 million in Manhattan. The information will be shared with law enforcement.

The orders will be in effect from March 1 through Aug. 27 but could be made permanent through rulemaking or expanded to other cities, depending on the findings.

For several years, Treasury's FinCEN division has worked with mortgage brokers, as well as government-sponsored mortgage giants Fannie Mae and Freddie Mac, to identify buyers who may attempt to launder illicit money through mortgaged purchases of high-end homes. But all-cash purchases have represented a gap in the system.

Title insurance companies or buyers that provide false information would face penalties, says Stephen Hudak, a FinCen spokesman.

Of 32,050 sales of existing homes in Miami-Dade last year, 1,176 were all-cash transactions of more than $1 million, according to the Miami Association of Realtors. Many buyers are from Latin American countries and have valid reasons for shielding their identities, including ensuring their safety, association CEO Teresa Kinney says.

She says she supports Treasury's new initiative. If buyers are using home purchases to launder money, “That's not what we want for our market,” she says.

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