Treasury Wants More Oversight Of All-Cash Real Estate Deals
The US Treasury Department is looking to expand its oversight of all-cash real estate deals in an effort to crack down on money laundering. Currently, certain high-end real estate transactions are exempt from the requirement to disclose the buyer's identity, making it easy for criminals to launder money through property purchases. The proposed rule change would require all buyers to disclose their true identities for any real estate transaction involving more than $300,000 in cash.
Background
Real estate has long been a popular way for criminals to launder money. Property purchases can be made anonymously and the money can be easily moved across borders. In 2016, the Treasury Department's Financial Crimes Enforcement Network (FinCEN) began requiring title insurance companies to identify the true owners of shell companies used to buy high-end real estate in certain cities. The rule applied to transactions involving more than $3 million in cash in New York City and $1 million in cash in Miami, Los Angeles, San Francisco, and San Diego.
The Proposed Rule Change
The proposed rule change would apply to all real estate transactions involving more than $300,000 in cash, regardless of the location of the property. Buyers would be required to disclose their true identities to the title insurance company, which would then report the information to FinCEN. The proposed rule change would also apply to transactions involving virtual currency, such as Bitcoin.
The Treasury Department estimates that the proposed rule change would affect approximately 25% of all real estate transactions in the US. The National Association of Realtors has expressed concerns about the impact the rule change could have on the real estate market, particularly in areas where cash sales are common. However, the Treasury Department believes that the potential benefits of the rule change outweigh any negative impact on the market.
The Benefits of the Rule Change
The primary benefit of the proposed rule change is that it would make it more difficult for criminals to launder money through real estate transactions. By requiring all buyers to disclose their true identities, law enforcement would have a better chance of identifying and prosecuting individuals who use real estate to launder money. The proposed rule change would also make it more difficult for foreign buyers to hide their assets in the US.
Another potential benefit of the rule change is that it could help to prevent the real estate market from being used to drive up housing prices. All-cash real estate transactions have been known to inflate housing prices, particularly in high-demand areas. By requiring buyers to disclose their true identities, the proposed rule change could help to prevent this type of market manipulation.
Conclusion
The proposed rule change is part of the Treasury Department's ongoing efforts to crack down on money laundering and other financial crimes. While the rule change could have a negative impact on the real estate market in some areas, the potential benefits of the change are significant. By making it more difficult for criminals to use real estate to launder money and hide assets, the proposed rule change could help to protect the integrity of the US financial system.