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Feds to Go After Lawyers Involved in Secretive Real Estate Deals

By Casey C. Sullivan, Esq. on January 19, 2016 | Last updated on March 21, 2019

If you're a lawyer who helps shady characters invest in high-end real estate or aids anonymous L.L.C.s looking to buy up Manhattan penthouses, the feds may have you in their sights.

The Treasury Department announced last week that it will start identifying and tracking secret buyers of high-end real estate and will soon turn its focus to the real estate agents, bankers, and attorneys who assist in the deals.

Taking Aim at Those Empty Miami and Manhattan Condos

The news comes from the Treasury's Financial Crimes Enforcement Network, which issued new Geographic Targeting Orders last week. Those orders require title insurance companies to "identify the natural persons behind companies used to pay 'all cash' for high-end residential real estate." The orders require title insurance companies to reveal the "true 'beneficial owner'" behind L.L.C.s and partnerships in real estate deals.

The move is meant to help identify real estate-based money laundering schemes. A bit of a pilot program, it's focusing on two markets where anonymous, all-cash purchases have become increasingly common -- and where some of the most expensive real estate in the world sits owned, but never occupied.

The orders are limited to the Borough of Manhattan and Miami-Dade County and only for 180 days, beginning March 1st and lasting until August 27th, 2016.

Title Insurance Now, Attorneys in the Future

While title insurance companies are the focus of FinCEN's attention at the moment, attorneys and other real estate professionals will come under increased scrutiny in the near future. Future investigations and enforcement actions are expected to move away from title companies and focus on lawyers, bankers, real estate agents, and L.L.C. formation agents, according to The New York Times. The information gathered under the current GTOs could be essential to future prosecutions.

The opaquer a real estate transaction is, the more likely it will be to garner federal scrutiny, according to Jennifer Shasky Calvery, the director of FinCEN. "We think some of the bigger risk is around the least transparent transactions," she explained.

FinCEN has long suspected that U.S. real estate was being used for money laundering. In 2008, the agency released a report on money laundering in residential real estate, followed by a study on suspicious activity in title and escrow companies in 2012.

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