Groups call on U.S. Government to regulate the use of anonymous companies to buy property and to require diligence on the sources of money by financial institutions

The U.S. Treasury must close loopholes in the current legal framework that allow corrupt individuals to launder money in the United States through anonymous real estate transactions, according to Transparency International-USA (TI-USA).  TI-USA has sent a letter to the U.S. Department of Treasury, signed by 17 civil society organizations, seeking prompt action to require:  1) due diligence by professionals in the real estate sector; and 2) extending due diligence requirements by financial institutions to encompass companies and other legal entities.

Millions of dollars are spent in the United States on luxury property by persons who disguise their identity using anonymous companies.  They are able to do so because U.S. law does not require the real estate industry to carry out background checks on the source of purchase funds and determine who is the ultimate (“beneficial”) owner.  The real estate industry continues to enjoy a 2002 temporary exemption from the PATRIOT Act requirement for implementation of anti-money laundering programs.

The use of real estate to hide corruptly acquired funds by wealthy individuals from outside the United States is well known.  Last month the New York Times series “Towers of Secrecy,” revealed how billions of dollars’ worth of luxury real estate in New York City has been purchased using shell companies by individuals under investigation for corruption and other crimes.

“Due diligence checks on the sources of money going into high end luxury property are essential to help stop the flow of illicitly acquired funds into the United States and prevent the corrupt from enjoying the funds they have stolen ,” said Claudia J. Dumas, President and CEO of TI-USA.

TI-USA and its partners are also calling on the U.S. Government to require financial institutions to conduct due diligence not just on accounts held by individuals but also by legal entities – many of which are shell companies.  Finally, TI-USA and its partners are calling for the U.S. Government to require public registries of the beneficial owners of companies so that individuals cannot hide behind layers of anonymous companies.

“Buying real estate with the proceeds of corruption is unacceptable and it is imperative that the intermediaries in these transactions – real estate brokers in particular –check where money for these purchases comes from and that shell companies are not used to complete these shady deals,” said Shruti Shah, Vice President for Programs and Operations at TI-USA.

Under its recent initiative, UnmasktheCorrupt, Transparency International is calling on governments around the world to deny the corrupt the ability to enjoy luxury lifestyles with ill-gotten gains and to take actions to support the return of funds to the countries from which funds have been stolen. It is calling for an end to secret companies, public registries that reveal the beneficial owners behind all companies, restrictions on the foreign travel of corrupt individuals and requirements for those selling real estate and luxury goods to do adequate due diligence on their customers.

Transparency International-USA is the U.S. chapter of the global Transparency International movement, which is present in more than 100 countries around the world. TI-USA is committed to improving governance both in the United States and internationally.