US to crack down on high-end real estate purchased with ‘dirty money’

Move comes ahead of court battle over multimillion-dollar Manhattan apartments bought by Russian fraudsters via offshore shell companies

The US government on Wednesday announced a crackdown on corrupt foreign officials and international criminal masterminds buying up multimillion-dollar Manhattan apartments with dirty money.

Jennifer Shasky Calvery, director of the Financial Crimes Enforcement Network (FinCEN), a branch of the Treasury, said all cash buyers of high-end properties would be forced to reveal the true beneficial owner and would no longer be able to hide behind a string of shell companies.

We are seeking to understand the risk that corrupt foreign officials, or transnational criminals, may be using premium US real estate to secretly invest millions in dirty money, Calvery said.

Geographic targeting orders (GTOs) will require title insurance companies which hold a register of companies owners to identify the natural persons behind shell companies used to pay cash for properties worth more than $3m (2m) in Manhattan and $1m in Miami-Dade County, the nations second-biggest centre of overseas investment in property.

FinCEN said the information gathered in the GTOs would advance law enforcements ability to identify the natural persons involved in transactions vulnerable to abuse for money laundering and make it easier to secure money-laundering convictions. However, the orders are only operating on a trial basis between March and the end of August.

The move comes as the US government prepares for a court battle next week to seize control of multimillion-dollar Manhattan apartments bought by Russian fraudsters via offshore shell companies. The scheme was exposed by Russian lawyer Sergei Magnitsky, who was arrested after filing a complaint and died in prison.

The US Department of Justices filing says: Russian criminal organization including corrupt Russian government officials defrauded Russian taxpayers of approximately 5.4 billion ruble ($230m) through an elaborate tax refund fraud scheme. After perpetrating this fraud, members of the Organization have undertaken illegal actions in order to conceal this fraud and retaliate against individuals who attempted to expose it.

As a result of these retaliatory actions, Sergei Magnitsky, a Russian attorney who exposed the fraud scheme, was falsely arrested and died in pretrial detention.

The filing adds: Members of the organization, and associates of those members, have also engaged in a broad pattern of money laundering in order to conceal the proceeds of the fraud scheme. This money laundering activity has included the purchase of pieces of Manhattan real estate with funds commingled with fraud proceeds.