862018 Rubio plans national crackdown on real estate money laund.docx

8/6/2018 Rubio plans national crackdown on real estate money
laundering | Miami Herald
https://www.miamiherald.com/news/politics-
government/article215762120.html 1/13
POLITICS
Crackdown on dirty money shook Miami real estate.
Now, Rubio wants to take it national
WASHINGTON —
BY KEVIN G. HALL AND NICHOLAS NEHAMAS
[email protected]
[email protected]
July 31, 2018 07:00 AM
Updated July 31, 2018 11:55 AM
In a move with significant implications for the U.S. housing
market, Florida
Republican Sen. Marco Rubio is seeking to take a Treasury
Department crackdown on dirty
money in luxury real estate and expand it from a few high-
priced enclaves to the entire nation.
Rubio says his proposal is an attempt to root out criminals who
use illicit funds and anonymous
shell companies to buy homes — a form of money laundering
that hides the cash’s tainted origin
from law enforcement and banks. The widespread practice
enables terrorism, sex trafficking,
Privacy - Terms
corruption, and drug dealing by providing an outlet for dirty
cash, according to transparency
advocates.
Through an amendment to an unrelated major spending bill,

Rubio will ask Treasury to study
whether government regulators should force shell companies
that buy homes priced at $300,000
or more in cash nationwide to disclose their owners. That could
be a figure as high as 10 percent
of the nation’s real-estate deals.
A similar reporting requirement affecting transactions priced at
$1 million or more has already
had a chilling effect on all-cash corporate sales in Miami-Dade
County, which has been under
Treasury’s microscope since 2016.
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“Shell companies involved in shady activities are a big problem,
especially throughout South
Florida,” Rubio said in a statement to McClatchy and the Miami
Herald. “With this provision, a
study would be conducted to look at requiring all shell
companies that make cash transactions,
regardless of their area, to disclose their identities.”
The amendment builds on a previous Treasury disclosure order
that applied only to certain
markets, including South Florida.
That order — which forced shell companies buying homes with
cash to reveal their true owners to
the government — has been in place in some areas since March
2016 at various price points. Its
effects were immediate and stunning. As soon as the order took
hold, shell companies buying
homes with cash dropped off the map, a recent study by
academic economists found. In Miami-
Dade, the number of corporate cash sales plummeted 95 percent,
although a strong overall
market suggests creative buyers found ways to circumvent the
rules, researchers said.

Before the crackdown, corporate cash sales accounted for
roughly a third of home-sale volume in
Miami-Dade, which is popular with foreign investors.
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The amendment has the support of the top Democrat on the
Senate Finance Committee, Oregon’s
Ron Wyden, as well as Rhode Island Democratic Sen. Sheldon
Whitehouse. Both have tried to
widen disclosure of true owners of shell companies, which can
be listed in the names of lawyers,
accountants, and other fronts. The lack of corporate
transparency frustrates law-enforcement
officials, who say it stymies their investigations.
A vote is expected on the overall bill as soon as this week,
Rubio’s office said.
The powerful real-estate industry has fought attempts from the
government to have it act as a
watchdog against money laundering, as banks, precious-metals
dealers, money-service businesses,
and other financial institutions are required to do. Many
Realtors and developers say their clients
are simply wealthy buyers seeking privacy, not criminals.
But over the past two years, Treasury has moved with force into
what had been a largely
unregulated sector of the U.S. financial system. Starting in
Miami-Dade County and Manhattan
two years ago, Treasury’s Financial Crimes Enforcement
Network (FinCEN) began requiring
anonymous shell companies to disclose their true owners when
they bought pricey homes with
cash.
The temporary directives — called “geographic targeting

orders” or GTOs — were later expanded
to other housing markets in Florida, New York, Texas,
California, and Hawaii where foreign and
anonymous investors are gobbling up real estate and driving up
prices. The rules require title
agents to identify the owners of shell companies buying homes
with cash and disclose their names
to the federal government.
d
Offshore corporations have one main purpose - to create
anonymity. Recently leaked documents reveal that some of
these shell
companies, cloaked in secrecy, provide cover for dictators,
politicians and tax evaders.
By Sohail Al-Jamea and Ali Rizvi
“The GTOs are working, and it’s time they were expanded.
Laundering money through real estate
isn’t new, but [what is new is] an effective approach to combat
dirty money,” said Clark
Gascoigne, deputy director of the Financial Accountability and
Corporate Transparency (FACT)
Coalition, a watchdog nonprofit.
Rubio’s proposal to take the project national, Gascoigne added,
“sends a strong message that
we’re serious about protecting the U.S. financial system, the
real-estate market, and communities
across the country.”
Stephen Hudak, a spokesman for FinCEN, declined to comment.
Cracking down
The Rubio amendment asks Treasury to consider expanding the
FinCEN directive to include all
cash real-estate transactions over $300,000 anywhere in the

United States.
It would give Treasury 180 days to submit a study to Congress
providing details about the data
that has been collected by FinCEN since 2016 and how it is
being used. The agency is also being
asked to determine if it needs more authority to combat money
laundering and whether
expanding the targeting order would be of use. In addition,
FinCEN is asked if a registry of
company owners — something supported by a bipartisan cast of
federal legislators — would help
authorities fight money laundering, tax evasion, election fraud,
and other illegal activities.
READ MORE
Rubio Whitehouse Wyden FinCEN GTO amendment.pdf
Previously, the FinCEN disclosure requirement kicked in for
corporate cash sales that were priced
at $3 million or higher in New York City, $1 million or higher
in Miami-Dade, Broward, and Palm
Beach, and at different price points in other states. In May,
FinCEN enacted a new directive that
secretly lowered the number to $300,000 in all GTO areas.
Sources familiar with the agency’s
thinking say the new order was kept confidential because
regulators don’t want to give money
launderers a road map for structuring their transactions to avoid
reporting.
Rubio’s amendment would start at that lower price point,
covering a major chunk of home sales
nationwide. Last year, the median U.S. home sold for a price of
$247,200, according to the
National Association of Realtors.

A cash transaction is one in which there is no mortgage and the
property is purchased outright.
Cash doesn’t just mean stacks of greenbacks; it also includes
such financial instruments as wire
transfers, checks, and money orders. Unlike mortgages, cash
deals don’t involve heavy scrutiny
from banks, which can identify potential money laundering and
file suspicious-activity reports to
the feds.
READ MORE
Rubio Whitehouse Wyden FinCEN GTO amendment.pdf
The 2016 publication of the Panama Papers spotlighted how
anonymous shell companies in
faraway tax havens were used to camouflage property purchases
in the United States by
politicians, drug traffickers, and financial fraudsters. Housing
analysts argue that the flow of
anonymous money is driving up prices.
“There’s hardly a metropolitan area in the country that is not
experiencing a real public-policy
issue regarding affordable housing,” said Ned Murray, a
housing expert and associate director of
Florida International University’s Metropolitan Center. “The
whole focus of the real-estate
industry is on ... supplying homes for wealthy investors that we
don’t know much about. It really
is a factor for prices and supply.”
Much of the world has responded to the threat of corruption in
real estate by requiring greater
ownership disclosure. The United States has done relatively
less, although Rubio’s amendment
could help close the gap.

Those operating in the shadows of the real-estate market
certainly seem aware of the Treasury
disclosure requirements — and are working to get around them.
Take Carmelo Urdaneta Aqui, who is the former legal counsel
to the Venezuelan Ministry of Oil
and Mining. He was recently among those charged in a federal
$1.2 billion money-laundering
case involving funds stolen from Venezuela’s state oil company.
When Urdaneta prepared to close on a brand-new, $5.3 million
condo at the Porsche Design
Tower in Sunny Isles Beach, he was informed by paperwork
from the developer that “taking title
[to the unit] under a company or trust may trigger FinCEN
reporting requirements,” according to
a federal indictment filed last week. He was worried enough
about the disclosure that he
discussed how to avoid it with a government informant.
Ultimately, Urdaneta set up a company in his wife’s name to do
the deal, prosecutors allege.
Developer Gil Dezer’s company built the Porsche Design Tower
in Sunny Isles Beach, where units sell for millions
of dollars to wealthy out-of-towners.
David Santiago - [email protected]
Dezer Development did not say why it alerts potential buyers
that they might end up on
Treasury’s radar.
“All language relating to legal requirements associated with
closings was prepared by Dezer
Development’s outside legal counsel,” a spokeswoman wrote in
an email to the Herald on
Monday.
The 60-story Porsche Design Tower is famous for a car elevator

that allows owners to park in “sky
garages” within their units. On Friday, federal prosecutors
indicated that they would move to seize
the unit.
Bad for brokers?
While overall home sales held steady even after the FinCEN
rule went into place, the real-estate
study found, luxury home prices were slightly softer in markets
affected by the GTO.
That suggests that expanding the GTO could have a dampening
effect on the nation’s real-estate
market, said Jeff Morr, a luxury real-estate broker at Douglas
Elliman and chairman of the Miami
Master Brokers Forum, an industry group.
“Does it stop money laundering? Probably, yes,” Morr said. “Is
it good for the real-estate market?
Probably, no.”
But at least making the rule nationwide might take some of the
heat off Miami, he said.
“It may make Florida less unattractive now that it’s
everywhere,” Morr said. “We shouldn’t be
treated differently than other areas.”
The crane has become the unofficial city bird of Miami during
the latest construction boom.
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That was exactly the sentiment of the Miami-Dade County

Commission when the rule was first
enacted in 2016. At the time, commissioners passed a symbolic
resolution asking regulators to
stop singling out Miami for special scrutiny. The industry still
feels the same way.
Legitimate buyers need privacy, too, said Ron Shuffield,
president and CEO of EWM Realty
International.
“There are wealthy people who don’t want everyone to know
that they live at the end of the
block,” Shuffield said. “If someone is determined to launder
money, they can pick anywhere in
the country to do it, from the smallest city in the Midwest to
Miami or New York City. It’s only
fair that every area have to report. Otherwise, the rules could be
scaring people away from certain
markets.”
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