Conceal Estate, US Cracks Down on Hot Money Condo Loophole

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New York's swankiest sky­ scrapers have become the new Swiss banks for the world's rich­est undesirables.
It's ironic, considering that for de­cades Washington led the charge against the Swiss and others for fa­cilitating money laundering through numbered bank accounts. Today, Switzerland has cleaned up its act and the "filthy" rich have turned to New York City, turning it into a secrecy haven to stash their cash through the use of shell companies.
The flood of dirty money of un­known origin into New York is stag­gering. In the past 5 years, about $8 billion worth of apartments worth $5 million or more have been bought, or three times' higher than years previous. Most troubling is that 50% of these have been bought for cash, forked out by shell companies con­ trolled by persons unknown.
The United States as a whole has become a magnet for unsavory peo­ple because its real estate developers and lawyers are not legally required to know who their clients are, as Swiss banks now must.
Finally, despite years of lobbying by law enforcement officials, the federal government is starting to close this loophole.
Bipartisan legislation has been in­troduced in Congress to require transparency, and the US Treasury Department announced the creation of a public ownership registry in New York City and Miami -- that may eventually be rolled out nation­ally.
But secrecy should have been made illegal years ago. Not only does it hide the identity of the crooked, violent and corrupt, it makes investi­gations or seizures impossible. The bad guys invest their cash in a condo or other assets through a US trust or shell company managed by another shell company in Grand Cayman or Hong Kong, owned by another trust in Guernsey or Singapore with an account in Luxembourg managed by a Swiss banker who doesn't know who the owner is.
Growing demand to "out" owner­ ship by law enforcement officials has been ignored due to intense lob­bying by the real estate, legal and ac­ counting industries.
"We like the money," said Ray­mond Baker, the president of Global Financial Integrity, a Washington nonprofit that tracks and condemns the illicit flow of money. "It's that simple. We like the money that comes into our accounts, and we are not nearly as judgmental about it as we should be."
It appears, however, that the tide is turning. Cases have shown that shell companies not only conceal sleazy foreigners, but also have en­abled American criminals who have defrauded Medicare, embezzled from public schools, scammed the elderly and made illegal contribu­tions to American political candi­dates.
An end to secrecy is supported by the G7, United Nations and the Orga­nization for Economic Cooperation and Development. The concern is that countries with hot money out­ flows are being destabilized, while countries inundated with illicit cash are developing real estate bubbles and high housing costs for ordinary residents.
The biggest losers are China, where $1.39 trillion left between 2004 and 2013; Russia, with $1 tril­lion hidden, and corrupt Mexico, with an outflow of $528 billion.
In some African nations, the out­ flow of funds is so sizeable that it is shrinking the size of their economies and sabotaging their societies.
Meanwhile in New York, the flood of buying by persons unknown is damaging the housing market. Be­tween 2010 and 2015, the average square foot price of a residence in New York City jumped from $1,000 to $1,450, an increase of 45%.
Identifying the buyers of luxury apartments may not lower your rent overnight. But it would certainly make foreign criminals think twice before they bought another $50 mil­lion condo.

First published New York Post Feb. 12, 2016