Luxury Property Crackdown

The US is out to crackdown on luxury properties fearful of money launderers.

September 26, 2016

By: Bobby Casey, Managing Director GWP

luxury propertySo either money launderers are the new boogey man, the US government is desperate to control and monitor wealth, or both. Headline after headline talks about these money launderers as if they posed this existential threat to anyone.

I think they are hoping that people won’t actually look into what a money launderer actually is, because once you know, you’re left wondering what the big deal is.

I’m not suggesting everyone go out and launder money. I’m just saying it’s really not the scary thing it’s being made out to be. But it provides an excellent cover for more intrusive policy!

Money laundering is the reason why the FinCEN has issued vague, but punitive guidance on crypto-currency.

Money laundering (and tax evasion) are why we should be steaming livid about offshore banking.

Money laundering is why people who buy big-ticket items shouldn’t have a modicum of privacy. You’d think the one person on earth who’d NEED the most amount of privacy are the ones who stand the most to lose: wealthy people with the means to buy high ticket items!

In any case, money laundering is simply concealing the source of income by funneling it through another channel. Unto itself it just makes it a little more difficult to figure out what or who the source of money is. The issue isn’t the money laundering, per se. It’s the idea that unscrupulous people often do it. And those unscrupulous people might be involved in activities that MIGHT have a victim.

So you might be thinking, “Ok, then go after money launderers…” Ok, but we need to cast the net a little wider because money launderers use various methods to clean the funds, which means any activities money launderers might engage in, becomes a smear on everyone else who does those things.

Arguments like, “If you’ve done nothing wrong, you have nothing to hide,” defend intrusions upon our freedoms. They don’t make us safer. Remember, the ones seeking this sort of transparency are also thieves in their own right.

Of ALL the people who buy large ticket items like real estate, how many buy homes above $1 million?

Of those, how many buy them outright in cash?

Of those, how many put the property in an LLC or shelf company?

Of those, how many are laundering money trying to cover up illegal activity?

Of those, how many are involved in illegal activity which involve actual victims (i.e. theft, human trafficking, or murder for hire)?

If that amounts to a whole percentage point of the entire world population, I’ll eat my hat. But we’re going to subject everyone to this scrutiny to get at this sliver of people?

When have we seen this before? Oh that’s right, the ACA, Patriot Act, NSA spying, the drug war, stop and frisk, sobriety check points, the TSA, and FATCA just to name a few. Casting the net this wide inevitably snags harmless innocents in the process. We shouldn’t be so eager to catch a money launderer that we’re willing to hang everyone else out to dry.

FinCEN remains concerned that all-cash purchases (i.e., those without bank financing) may be conducted by individuals attempting to hide their assets and identity by purchasing residential properties through limited liability companies or other opaque structures.

“A FinCen official said a significant portion of the records being reported by title insurance companies have been tied to possible crimes, including one person involved in a $16 million suspicious withdrawal, another involved in a possible counterfeit check scheme and a buyer involved in shuffling millions around through suspicious wire transfers in South America.” (Source: CNN)

Oh, the government is concerned that people who operate in cash and aren’t going into hock might be trying to hide their assets and identities? So protecting your things and identity is suspicious now? That’s odd. I thought it was a natural right of all people.

And to tout their “success”, they have found someone with a lot of money moving said money around… and someone engaged in a check fraud scheme. All this to catch a check fraud scheme? I’m not saying check fraud is acceptable, but it’s not worth sacrificing people’s right to privacy and protection to apprehend them either.

And look what actually constitutes “benefits”. Increased SARs? You mean more banks selling out their depositors? Lovely.

Treasury officials said they were seeing benefits to the program in Manhattan and Miami, citing an increase in suspicious-activity reports being filed by banks and noting that the Department of Justice is finding the combination of the real estate and banking information to be helpful in its investigations.” (Source: NYT)

Look at what is being done to the integrity of professional relationships in the name of “safety”? Banks selling out their clients. Realtors and title agents selling out their clients. Doctors are starting to sell out their patients. Internet businesses selling out their users. What next? Lawyers and clergy?

For now, they are targeting a very narrow list of areas, through what is called a GTO (Geographic Targeting Order). This includes, all five boroughs of New York City, counties north of Miami, Los Angeles County, San Diego County, the three counties around San Francisco and Bexar County (where San Antonio is located).

The dollar values involved purchases of more than $500,000 or more in Bexar County, which includes San Antonio; $1 million in Florida; $2 million in California; $3 million in Manhattan; and $1.5 million in the other boroughs of New York City.”

The thresholds are relatively high for these markets, and the geographies are few. That’s the palatable news (not good, but not devastating). Linking increased numbers of private buyers to money laundering is like linking increased purchases of fire arms to violent crime. The numbers just don’t bear that out. It’s a horrible association to make, and puts people who legitimately want to protect their hard earned assets in the same category as a human trafficker. Just like FATCA puts the average expat working in a different country in the same light as high end thieves.

The whole point of due process is that rights remain protected while in the process of investigating a crime. The lynchpin of due process is that we are all INNOCENT until PROVEN guilty beyond a reasonable doubt. That’s not what this is at all! This is a scorched earth witch hunt.   This is yet another morally hazardous policy rolled out in the name of “safety” which ultimately will only succeed in making more innocent people vulnerable to things like litigation and asset forfeiture. How is this an acceptable trade off?

These types of policies are due process work arounds. Rather than wait for someone to be accused and charged with a crime, we will check inspect everyone engaging in this LEGAL activity and presume they might be up to no good. This pre-crime stuff is scary, and has no business in a purported “free country”.

What do I say to all of this? Well, I wouldn’t tell someone to stop buying guns or trade their guns in because the government is on a tear about guns. You’re absolutely morally and legally entitled to protect yourself. Likewise, I can’t in good conscience tell you to NOT protect your assets by NOT setting up a perfectly legal corporate structure. If anything, I would say get them sooner rather than later because the FinCEN is coming soon to a county near you!

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