Congress To Introduce Bill Requiring LLC Disclosure To Fight Money Laundering In Real Estate
The movement to fight money laundering by stripping anonymity away from real estate investments is gaining steam.
Rep. Carolyn Maloney plans to introduce a bill that would force all LLCs to reveal their owners to the government, the New York Post reports. The bill, which Maloney says will have bipartisan sponsorship, would close a gap in the U.S. Patriot Act exempting real estate from the act's ban on anonymous investing.
Maloney is the Democratic representative for New York's 12th District, which includes 650 Fifth Ave. The office building's construction in 1978 was funded by Iran a year before the coup that overthrew the shah, and has since been owned by a series of Iranian shell companies that the federal government alleges have been funding terrorism for decades, according to the Post.
Due to the anonymity granted by LLCs, the government has spent over 30 years pursuing its case, which it won in 2016 but remains in the appeals process. Over that time, LLCs have become so problematic that as much as 30% of real estate purchases involving them in New York, Miami, Los Angeles, San Diego, San Antonio and San Francisco involve suspicious buyers, according to the Treasury Department's Financial Crimes Enforcement Network.
Money laundering through real estate has been thrust into the spotlight since the election of President Donald Trump and the subsequent investigation by special counsel Robert Mueller into possible collusion between his campaign and Russia. Among Mueller's first indictments was former campaign manager Paul Manafort for money laundering through real estate, among other crimes. Mueller has also subpoenaed The Trump Organization to turn over documents involving Russian business ties.
Former FinCEN director Jennifer Shasky Calvery boosted the department's power with a series of Geographic Targeting Orders that, at present, require the disclosure of those behind LLCs purchasing properties worth over $300K in 12 major U.S. cities. Though they significantly curtailed all-cash transactions from LLCs, GTOs were not retroactive and caused some critics to say the measure didn't go far enough, according to the Post.
In October, Sen. Sheldon Whitehouse led a request that FinCEN disclose its findings from the first years of the GTO program. The open letter also asked the Government Accountability Office, which oversees FinCEN, for any recommendations related to the program. Among the perceived shortcomings, according to the Post, is that disclosure is left to the insurers of LLCs.
Maloney's bill would have states require the disclosure of principals in all LLCs that incorporate within their borders and update those files annually.