Recent reports indicate that real estate is being used as an efficient way to launder money for some of the wealthiest people in our country. In fact, many politicians are reportedly using real estate to skirt financial disclosure laws by hiding their wealth under the guise of it being spent on business investments or charity.
Asset bubbles occur when asset prices rise beyond what reasonable expectations are. This happens because investors feel confident about the future value of something (like stock market shares) so they increase the price to obtain more of them. It can also happen when buyers believe the price will keep rising, making it hard to get good quality goods at a discount.
When this perception ends and the assets’s true cost is revealed, then there is a sudden drop in the price. This creates a lot of stress for owners who had invested heavily in the asset.
In either case, the rich end up with a larger amount of the asset than would normally be the case. So instead of buying one share of stock, they buy five or ten to conceal its nature. Or instead of donating one car to a cause, they donate twenty to hide its worth.
This article will talk you through several examples of how real estate has been used to launder money. After reading, you will know if your home has been secretly bought and sold multiple times and for what purpose. You will also learn why these indirect ways to profit from investing are problematic.
Real estate is a valuable resource.
Why do criminals do this?
There are several reasons why people launder money through real estate. Some do it for fun, some do it to make easy money, and some do it because they’re very clever at doing so.
Many times, criminal masterminds will purchase a house as an investment. They may rent out or sell the property, but only part time. The rest of the time, they use the home for something illegal- like keeping a clandestine business that they use to process or transfer large amounts of cash or goods.
Some individuals also invest in a property with no intention of living there. Having a second residence is ideal if you want to be able to keep your life separate from yours. This way you can have one side that belongs to you and one side that you don’t.
Real estate can be used for more than just investing, though. It is cost effective and simple to run a secret business out of a house.
How can you tell if you’re a target?
Recent revelations about wealthy individuals using real estate as a way to launder money are very concerning. Not only does this pose a risk to your financial well-being, but it also puts others in danger.
If you are ever approached to invest in or sell an expensive property, do not fall for it!
You may be asked to back up any statements with hard evidence – like documents showing how much you were paid for the property and who owned it before.
The seller might even offer to pay you more to go along with their scheme. It is important to remember that selling a home is a risky business, so make sure you are protected just in case things go wrong.
Brokers must inform clients of potential risks when negotiating a sale, so ask questions and check out all details thoroughly.
Who are the victims of this?
The most recent revelations come in the form of an indictment unsealed last week against 13 individuals for conspiring to launder money through real estate. These individuals were allegedly involved in a conspiracy that spanned more than a decade, running from 2006 to 2018.
The launderers targeted low-income communities with no access to legal help and took advantage of the lack of regulation surrounding real estate transactions to move money out and then into new properties.
They would find wealthy buyers who wanted to remain anonymous or use undocumented workers as straw purchasers to hide their true identity. Once the sale was completed, the launderer would resell either the original property or a similar one to make it look like there had been no change.
This article will talk you through how these crimes happen, what signs to watch out for and what actions you can take if you become aware of a situation. But first, let’s take a step back and consider why this is such a big problem.
What can you do to help prevent this?
The best way to avoid real estate transactions that could be used for money laundering is to stay away from high cost, quick flips or other types of property acquisitions.
Be careful about buying or selling a house with lots of people in it. You want to make sure no one else’s name appears on any documents related to the transaction.
And don’t let your seller pay using an expensive private mortgage company (or what seems like one). A bank will usually charge lower fees than these companies.
Experts say it’s impossible to tell if someone is trying to launder cash through their real estate purchases unless something doesn’t seem right to them.
Stay aware of your surroundings
Recent revelations about wealthy individuals using real estate as a platform to launder money are quite concerning. Not only do these properties typically increase in value rapidly, they may be marketed with clever language or false information.
As such, it is important to remain vigilant when buying or selling a property. You should ask yourself questions like “How well-managed was this company?” and “Does this make sense to me as an investor?�”
You can also look into whether there have been any lawsuits related to the business, regulatory actions taken against them, and if people ever question how much money you own.
Real estate is a great way to invest but making sure that it is being used for what it says it is can help prevent it from being laundered.
Report any suspicious activities to the police
Recent revelations show that real estate is frequently used as a tool to launder money. In fact, it’s so common that some experts refer to it as “the new gold.” This has people all around the world keeping an eye out for scams using this practice.
There are several reasons why real estate is such a good way to launder money. One of them is how easy it is to do. Another is how difficult it can be to trace the property once it’s been paid for. A third is how powerful investor interest in real estate can be. All three of these factors make real estate a perfect vehicle to use to launder money.
If you find yourself being drawn into a potential investment or sale related to real estate, try your best to walk away. It’s better to avoid becoming involved than to get hurt or worse due to dishonest dealings.
Report anything that seems off about the other party, their demeanor, or general conversations to the authorities.
Encrypt your data
Recent revelations show that real estate investors are using their expensive homes as “shell corporations” to launder money. This is very concerning for several reasons.
First, it shows how easy it is to use an asset in illegal activities. Second, it demonstrates how large-scale real estate investments can be used to conceal criminal activity. And third, it highlights the importance of insuring these properties.
Because this article will discuss some serious crimes, readers who may be uncomfortable or unprepared with such material should close this page before reading further.
How real estate is laundered
The term “laundering” refers to taking dirty (illegal) cash and altering it so that it no longer looks like dirty cash. More specifically, it means changing the color, composition, and amount of each bill.
This process was famously done back in the days when most countries did not accept greenbacks as legal currency. In those times, people would wash their bills by dipping them into acid or soda solutions.
Nowadays, banking institutions have more advanced ways to check if a note is counterfeit. These technologies scan for certain chemicals present in authentic notes but not counterfeits. By analyzing the chemical makeup of each bill, banks are able to tell whether a note is fake with high accuracy.
Real estate is particularly useful for laundering because it is typically owned by a business entity which makes it easier to cover its trace.
Don’t keep your valuables when you’re away
When you’re renting an apartment, make sure you don’t have anything valuable that you leave at home.
A lot of people drop money in real estate as their savings vehicle. However, this can easily be invested in ways that help launder money or conceal fraud. For example, many wealthy individuals use offshore trusts to purchase expensive properties they then lease from the trust.
These leases typically don’t require close inspection by lawyers and other professionals due to the limited term (usually less than five years) and lack of transparency about who owns what. The landlords often pay no attention to whether the tenants are legitimate owners or not because it doesn’t matter to them — they will likely retain legal ownership of the property after the lease expires.