Cash purchasers of high-end real estate are now likely to face intrusive investigations of their finances by federal authorities in yet another example of law enforcement targeting the use of cash in the course of large transactions.
Starting today, the Financial Crimes Enforcement Network (FinCEN) is going to be investigating all-cash purchases of luxury real estate in Manhattan and Miami-Dade County. FinCEN issued Geographic Targeting Orders (GTOs) that, through August 2016, will require certain U.S. title insurance companies to identify the people behind LLCs and other entities used for such transactions in those two areas.
This action follows a NY Times series that investigated the use of shell corporations to purchase the city’s most expensive properties, and the difficulty of identifying the people behind those transactions. That investigation tied international felons, among others, to purchases in NYC and suggested that they are using these types of all-cash transactions to launder illicit funds. FinCEN is relying on a little-used provision of the Patriot Act to investigate the matter.
If you think the Feds are going to stop in Miami and NYC, you have not been paying attention: an infamous case in Los Angeles is generating media attention and unrelated criminal charges, and the Feds seem to see money laundering wherever they see cash changing hands. LA is primed to be the next target if the Government finds its efforts in Miami and New York successful.
Lesson of the day for everyone in the business world: do not engage in cash transactions or you could find yourself caught up in a federal criminal investigation. Hyperbolic? Maybe. But the reality is that many unsuspecting businesses are being used by criminals to launder their cash, and the business owners only find out when they get a knock on the door and find a federal agent with a warrant in hand.