The Treasury’s Financial Crimes Enforcement Network (FinCEN) released an advisory to provide information on money laundering risks associated with certain real estate transactions. According to FinCEN, real estate transactions involving luxury property purchased through shell companies--particularly when conducted with cash and no financing--can serve as an attractive way for criminals to launder illegal proceeds.
Shell companies are typically non-publicly traded corporations, limited liability companies (LLCs), or trusts that have no physical presence beyond a mailing address and generate little to no independent economic value.
Most shell companies are formed by individuals and businesses for legitimate purposes. Shell companies can often be formed without disclosing the individuals that ultimately own or control them and can be used to conduct financial transactions without disclosing their true beneficial owners’ involvement.
The bulletin also provides several high-profile examples from recent Department of Justice investigations:
In conjunction with the bulletin, FinCEN issued revised Geographic Targeting Orders (GTOs) that require U.S. title insurance companies to identify the natural persons behind shell companies used to pay for high-end residential real estate in seven metropolitan areas in Florida, Texas, New York, California and Hawaii.