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Treasury Department Requires Reporting Names of All-Cash Buyers of Luxury Homes

Updated on January 21, 2016

All-Cash Home Purchases Believed to Hide Illicit Money

Criminals paying cash for homes are believed by the U.S. government of using the transactions to hide the source of their money.
Criminals paying cash for homes are believed by the U.S. government of using the transactions to hide the source of their money.

Government Wants to Stop Money Laundering in Real Estate

The U.S. Treasury Department plans to begin tracking the buyers of luxury real estate at a time investment in Washington area properties is picking up quickly.

Treasury Department officials said in a recent statement they are concerned the purchases could be used to launder illicit money, particularly when the real estate is bought in all-cash transactions by shell companies.

Sometimes the shell companies conceal the names of purchasers who obtain their money through drug deals, embezzlement or other illegal activities. The purchasers are called beneficial owners by realtors.

The Treasury Department announcement coincides with a new report from the Association of Foreign Investors in Real Estate that ranked the District of Columbia eighth in the world among the best cities for investment. Nationally, D.C. ranked fourth.

The new government policy marks the first time real estate companies have been required to disclose the purchasers in all-cash transactions.

The risk for realtors is that fewer purchasers will make the investments to protect their privacy. Most all-cash transactions are made for the highest-priced properties that yield the biggest commissions for realtors.

Additional risk comes from the Treasury Department's announcement that it also will investigate professionals who arrange the deals, such as real estate agents, lawyers and bankers.

Beginning in March, title insurance companies will have the first responsibility to find the names of buyers in all-cash transactions of greater than $3 million and submit them to the Treasury Department. The program that begins in March will continue through August, possibly with a permanent extension if government officials discover widespread evidence of money laundering in real estate deals.

The new government initiative resulted from a recent New York Times investigative story that said nearly half the real estate purchased nationwide in cash for more than $5 million was bought by shell companies.

The FBI recently organized a new unit with 10 agents directed at stopping money laundering. Real estate transactions are a primary focus for them.

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