The New York Times reports that the government has quietly imposed a new requirement, the disclosure of cash buyers of expensive real estate.
Concerned about illicit money flowing into luxury real estate, the Treasury Department said Wednesday that it would begin identifying and tracking secret buyers of high-end properties.
It is the first time the federal government has required real estate companies to disclose names behind cash transactions, and it is likely to send shudders through the real estate industry, which has benefited enormously in recent years from a building boom increasingly dependent on wealthy, secretive buyers.
People who can afford to buy real estate in a all-cash transaction, and that means “without bank financing,” not just having Mr. Green at the closing table, are the government’s new targets. It could be an indication of illicit money, or it could mean that some people are so fabulously wealth that they can afford what they buy out of savings. Or it could mean they just sold a place and have the proceeds available to purchase the next place.
But the key here is that they want to out the individuals behind the transaction, and place the burden on title companies to rat out the guy paying them.
Officials said the new government efforts were inspired in part by a series last year in The New York Times that examined the rising use of shell companies as foreign buyers increasingly sought safe havens for their money in the United States. The investigation found that real estate professionals, especially in the luxury market, often do not know much about buyers. Until now, none of them have been legally required to.
The use of shell companies in real estate is legal, and L.L.C.s have a range of uses unrelated to secrecy. But a top Treasury official, Jennifer Shasky Calvery, said her agency had seen instances in which multimillion-dollar homes were being used as safe deposit boxes for ill-gotten gains, in transactions made more opaque by the use of anonymous shell companies.
So people are doing something perfectly legal, using money lawfully earned, and trying to remain under the government’s radar to protect their privacy from government, because nobody trusts the nasty little gnomes in the government not to find a way to make their lives miserable, and that’s pissing off the little elves in government back rooms too much.
How dare you conceal yourselves! What do you have to hide?!?
There won’t be a huge outpouring of concern for the wealthy, because the rest of us hate them too. Then again, we hate drug dealers, the original targets of civil forfeiture, and so we let really bad law happen because it was targeted at them, and we only care about us.
See where this is going?
“We are concerned about the possibility that dirty money is being put into luxury real estate,” said Ms. Calvery, the director of the Financial Crimes Enforcement Network, the Treasury unit running the initiative. “We think some of the bigger risk is around the least transparent transactions.”
But dear petty functionary, individuals have no duty to be transparent to make your job easier. Even if real estate is being used to shelter illegal money, there are a lot of people who buy homes because, you know, they need a place to live. Is that a reason to put them on your enemies list?
The government will put the information into a database for law enforcement.
What could possibly go wrong? And when there is no cry about this outrage toward the wealthy because the vast majority of Americans, the groundlings, hate people who buy expensive houses, there will be law and regulations developed and approved that says this is a totally cool thing to do, and the 99% will applaud.
And once it’s all written in stone, and the law enforcement list of cash buyers becomes the new no-fly list and starts appearing in search warrants, wrapped in all manner of nefarious allegations about how cash buyers whose identities are hidden behind corporate walls are “often laundering illicit funds” (because that’s how they teach prosecutors to write warrant apps, and how judges can avoid having to read them), the mission creep will start.
The American dream of owning a home will eventually become the government’s dream of knowing everything there is to know about every home buyer’s financial situation. After all, we can’t let anyone get away with a cash transaction or trying to maintain what minimal privacy is left. That would be criminal.
I’m just surprised some lackey took so long to come up with this scheme. Just in NYC alone, Columbia and NYU have taken billions of dollars of real estate off the tax rolls and the benefit given to professors of living in multi-million dollar apartments is no longer taxable as earnings.
Government hates it when people “steal” from their coffers. But all of a sudden when civil forfeiture is drying up due to budget cuts, they figure out there’s a new cash cow in a town near them?
Shocking.
Sadly, your premonition is most likely spot on and the PATRIOT act paperwork we all must fill out when buying a house through our bankers will expand to new and greater requirements “to protect us”.
And the first comment goes completely off the rails and down the rabbit hole. On the bright side, you’ve taken the early lead for today’s Billy Madison prize.
You just have to wonder if the guy who made the video map of SECRET OWNERSHIP ACROSS THE U.S., at that newspaper you read everyday, was told that his first color scheme wasn’t nefarious enough looking or whether finCIN feed that durectly through that, newspaper you read everyday’s CIA back channels ready for publication?
~Treasury’s new naming requirements…
~Under the U.S.A. Patriot Act, the Treasury is already authorized …
~Future investigations will focus increasingly on professionals who assist in money laundering, including real estate agents, lawyers, bankers and L.L.C. formation agents…
Etc…,whee what fun lawyers too….????
P.S. Officials said the new government efforts were inspired in part by a series last year by that newspaper you read everyday. WTF esteemed one?! Not only do they refuse to give you a “New York Values” column those newspaper gnomes aren’t even stealing some of your basic SJ themes for series pieces.
Might be time for SJ to break out the dark colors for your back drop…there is an art to the mixing gray and black you know. And come to think of it, isn’t it about time you lifted some logo help from Treasury?
P.S.S. Everybody is after the treasure…what the heck! Before you know it, the only way one will be able to get any sleep at night will be to create your own “bank”.
But if the lawyers are gonna start losing sleep over helping folks stay under the radar so they can play in the back yard with their grandchildren on on Tuesdays and flirt with the babes from the Brazilian diplomatic core on Thursdays without having stalkers peer over the fence, what are the odds of the lawyers helping you out when you need to open your own bank and give yourself a loan for a house with a three season out door kitchen to impress the babes from the diplomatic core and cook your grandkids hotdogs while teaching them the ways of the world outside, so you don’t have to worry about finCIN blasting the cartoon network with 30 second ads and interrupting the lunch conversation.
What is the world coming to!
I’ve been thinking of getting a new grill lately. But there season might be a little too aggressive until the NY climate warms a bit more.
This sort of government action never even hits its purported targets.
What rich person with a shell company cannot use a bank, mortgage broker, or even another shell company to provide a mortgage?
If it’s an all cash transaction, they don’t have to use a title company, as it’s a bank requirement for the bank’s protection. But the honest rich schmucks will.
Wait, I just bought a house, and they told me the info on the deed and title is all public record. How is it done secretly? Or is that just my state?
Buy it in the name of an LLC. This is in the rich guy handbook. I gather you didn’t get one.
Ah. Can you mail me a copy? My address is public record because I’m not rich…
I didn’t say I had a copy.
I may be opening myself up to ridicule and a runner up in the Billy Madison Prize, but the Managers of the LLC are listed in the Corporations Index of each state. Members have to be listed in the filing paperwork for the LLC as well. If the government is that concerned about a particular transaction, can’t they, you know, cross-reference their own databases without this additional requirement? And why could’t you use a Realty Trust with a professional trustee to get around this new requirement? What rational basis is there to make every transaction suspect unless a person can prove otherwise?
There’s always ways around if you want to find them, just as there are ways around their new disclosure requirement. File the LLC with someone else named as gen partner, come in after the filing. No big deal. Or use a different vehicle like a RE trust. Whatevs.
As for “what rational basis” there is, why ask a question you already know the answer to? It’s regulatory, not criminal.
It’s a one-line handbook: “Pay someone who knows what they’re doing.”
If you try to DIY and you forget to cross the t’s and dot the i’s on all your fancy government filings, you might have a hella time proving you own the corporation or trust that owns what you thought was your house. Either that or the bank gets in a snit that you transferred ownership without permission, and they want you to pay off the mortgage yesterday.
This is the equivalent of TSA’s security theater: much sound and fury, signifying nothing.
You can make a cogent argument that all ownership of real estate should be fully public and traceable. But what makes this law so stupid is that it doesn’t even do anything. There are loopholes the size of a mack truck.
It’s just more coerced gathering of personal information. Your TSA analogy sucks (and no, I am not asking for 1000 words justifying your shitty analogy), but people who lack the interest in circumventing the law will be the ones whose information gets collected. The nice, regular, unassuming wealthy people.
I do a lot of this work and I’m intimately familiar with a lot of loopholes, at least in Mass. There are a lot of loopholes which appear to be known, practically speaking, only to the rich (avoiding transfer taxes by anonymous inter-entity transfers, etc.) They may be more common than you realize.
That said, I don’t see as much of an issue with the goals. We have centuries of evaluating the costs & benefits of public identification of property owners. I think the scale is pretty firmly on “overall benefit.” And the personal information shared can be minimal.
Feel free to give the government your own info all you like. Nobody (but nobody) gives a shit that it’s okay with you to give away other people’s information. In case I wasn’t clear, nobody.
This is a specious argument.
Corporations, LLCs, trusts, and similar entities are wholly government creations. The concept of allowing them to do “people things” like owning property, suing, etc. is purely a cost/benefit analysis. There’s no constitutional or moral right to have the government recognize a fictitious non-person at all, and there’s certainly no right to a particular set of privacy interests.
If you don’t like the requirements of using an entity, don’t use an entity.
Out of curiosity: other than the shitty implementation, what precisely do you see as the downsides of requiring some small %age of property owners to disclose their underlying identities to the same extent as basically everyone else in the country?
You’re like a bad penny, sometimes. This has nothing to do with the requirements of using a legal entity, but the imposition of a disclosure duty to circumvent existing rules only for a specific group that the government has targeted for law enforcement, sweeping in innocent people about whom no suspicion exists. The definition of “specious argument” is not argument that EH doesn’t grasp.
And what in the fucking world makes you so narcissistic to think your curiosity warrants my time?
This has nothing to do with the requirements of using a legal entity
Yes, actually, it does. It’s all about entities. If you don’t understand why, ask someone who does a lot of high value entity real estate transactions (hi, there, nice to meet you!) and they can explain it. Or read the bloody article, which explains that it affects “a legal entity involved in certain high-end residential real estate transactions”
only for a specific group that the government has targeted for law enforcement,
That is also incorrect. This is targeted at a set of actions, not at a set of people (or even a specific group of entities.) If you don’t do those transactions, you’re not an issue.
The implementation is shit but the concept is fine: it’s perfectly normal to focus on larger transactions.
sweeping in innocent people
Ah. There’s the rub. Entities are not people. Not a single “person” is getting “swept” by anything. Why do you talk like they are?
You are a moron.
Heh. Moron. You’re just trying to get the PC police down here to raise a stink, so you don’t have to answer. Try calling me a “retard,” it’ll work faster.
Seriously, though, you really want to hang your hat on “corporations are people” for this argument? Because that is where you seem to be going.
I give up. You are absolutely determined not to grasp what this is about. And I wouldn’t call you retard because I find the word offensive except in its correct use. You are by no means of limited intelligence, just grasp.
This has nothing to do with corporations being people. Did you even read the post? It’s about people using corporate identities to conceal their individual identities, and the government using compulsion to force disclosure of the individual behind the entity. You really are a meathead.