Can real estate purchasers expect complete anonymity during the transfer process?
There are a number of reasons to insist upon anonymity in the real estate purchase process, particularly if a buyer or seller wishes to keep the purchase price confidential. While many aspects of the real estate purchase process can be kept confidential, recent changes to federal laws may make it more difficult to make purchases of high-end real estate through the use of an anonymous LLC or trust.
According to the federal government, there has been a significant influx in anonymous high-dollar real property transactions, particularly in major metropolitan areas like New York City and Miami. While at first blush this may seem like a savvy way to conduct a complex investment strategy, investigators are suspecting a more sinister motive may be afoot: money laundering.
Investigators take aim at criminal activity
According to the FBI, the types of transactions at the top of the watch-list involve any of the following factors:
- All-cash transactions
- Use of shell companies as the purchaser
- Refusal to identify individuals involved in the purchase
- Extremely high-purchase prices of luxury homes and condos
Investigators began their inquiry into real estate-related money laundering schemes following the publication of a controversial article in the New York Times. In that piece, journalists revealed that shell companies were becoming an increasingly suspicious mechanism for foreign purchases to snatch up high-end real estate, all while realtors and U.S.-based attorneys were turning a blind eye to the actual identities of the purchasers.
For instance, the article revealed that a condominium in the Time Warner Center was recently purchased for over $15 million. The buyer? An entity known simply as “25CC ST74B L.L.C” – which was ultimately revealed to be tied to a wealthy Russian family with ties to organized crime. In the same building, foreign purchases – many of whom are facing corruption charges in their homelands – were made by entities with ties to Greece, China, Colombia, Malaysia, China, Kazakhstan and Mexico.
For the casual real estate purchaser, the new regulations are unlikely to create any difficulty or hurdle in the process – even if an LLC is used to make the purchase. Most notably, the FBI intends to focus its efforts on suspicious all-cash transactions, and has instructed title insurance companies to uncover the true identities of all applicants for title insurance policies.
If you have questions about how to purchase real estate under these new federal rules, you should consult with a qualified real estate attorney.