As political pressure mounts on Russian billionaires, authorities in the United States are turning their attention to a sector that has long eluded anti-money laundering regulations: real estate.
The Details
As per her staff, House Financial Services Chairman Maxine Waters (D-Calif.) wants to submit legislation in the following weeks to strengthen anti-corruption regulations in the industry.
The Financial Action Task Force, the Treasury’s main body for investigating such misbehavior, is working on legislation to reduce money laundering through real estate.
“American property investment can’t be a dark reservoir for oligarch money,” said Sen. Sheldon Whitehouse (D-RI), who is urging the Treasury’s Financial Crimes Enforcement Network (FinCEN) to create severe controls.
“We need strong anti-money trafficking safeguards for the business,” he said, adding that bipartisan support for the endeavor is developing in Congress.
The loopholes contained in property transactions highlight how hard it will be to track down Russian money in the United States as the US moves to pinch Russian enterprises abroad.
Furthermore, some of the steps are provoking a backlash from the strong industry, which worries that broad regulation changes might stymie transactions and harm the economy.
Russian oligarchs are continuing to profit from illegal investments in the U.S. because they can hide their money in private equity firms and hedge funds with almost no restrictions.
I'm calling on @USTreasury and @SECGov to close this loophole immediately. pic.twitter.com/5ggtwFJHxX
— Elizabeth Warren (@SenWarren) April 11, 2022
Anyone, especially foreign nationals, can now start an anonymous business and have that entity utilize funds to buy private residential real estate, which is one-way oligarchs and many others keep their money in the United States.
“There’s a solid argument suggesting, right now, the finest place to hide and clean ill-gotten wealth is actually the United States,” Secretary of the Treasury Janet Yellen said in December.
As per data released by The National Association of Realtors, expatriates made up 8.6% of all business buyers in 2021.
59 percent of corporate real estate transactions in the United States that included foreign buyers were all-cash acquisitions between 2016 and 2020.
Even before Russia attacked Ukraine, the campaign to address anti-money laundering gaps was gaining traction in Washington.
The Caucus Against Foreign Bribery and Kleptocracy was founded in June by 21 House members, notably Reps. Katie Porter (D-Calif.) as well as Adam Kinzinger (R-Ill.).
Action is Being Taken
Furthermore, regulators are outlining rules to conform with the Corporate Accountability Act, which Congress passed over President Trump’s veto in January 2021.
This is to establish reporting obligations on the real people — known as “beneficial owners” — who are behind various types of anonymous companies.
U.S. hunt for Russian oligarchs’ huge fortunes faces barriers offshore https://t.co/bzSsrGCiCs
— Michael Weiss 🌻🇺🇸🇮🇪 (@michaeldweiss) April 11, 2022
However, the war in Ukraine with Russia “increases the urgency” of the operation, according to Whitehouse.
Representatives from the multibillion-dollar real estate industry are now cautioning lawmakers against overreacting in the heat of the moment.
According to National Organization of Realtors representative Patrick Newton, the industry’s largest lobbying group is pushing for “targeted reforms that address specific issues.”
Newton explained, “This method focuses on unlawful behavior while limiting any detrimental influence on the real estate market, which accounts for almost one-fifth of the broader U.S. economy.”
“NAR is certain that in the rule-making process, targeted and effective policies will prevail.”
