Concerned about illicit money flowing into luxury real estate, the Treasury Department started identifying and tracking secret buyers of high-end properties. The initiative was put into place in March 2016 in two of the nation’s major destinations for global wealth: Manhattan and Miami-Dade County. The program has now been expanded to Los Angeles and San Diego counties as well as three counties around San Francisco.
The initiative by the Treasury Department is part of a broader federal effort to increase the focus on money laundering in real estate. The purpose is to obtain information about the identities of the individuals behind the all-cash purchases made by shell companies that shield purchasers’ identities. Treasury and federal law enforcement officials said they were putting greater resources into investigating luxury real estate sales involving shell companies, such as limited liability companies, partnerships, and other entities.
Real estate prices of luxury homes in California have benefited enormously in recent years by the influx of wealthy foreign buyers who often buy with all cash. Many of those buyers do not use their own names in the transactions. They do so for many different reasons, chief among them is privacy.
Future investigations will focus increasingly on professionals who knowingly or unknowingly assist in money laundering. At this point, the Title companies will be required to obtain the identities of the persons behind the shell companies. This includes obtaining a copy of a drivers’ license, Passport or other official government proof of identity.
In California, the definition of a luxury property is $2 million and above. There are a lot of properties that fit that description in our local Los Angeles.
How will this new regulation affect our local real estate markets? It remains to be seen.
You can read more in this LA Times articles.
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