Federal authorities on Wednesday announced a temporary, anti-money laundering crackdown on big-money real estate deals done secretly with cash in Miami-Dade County and New York City.
The new policy will require title insurance companies to identify the owners of shell companies that use cash to pay $1 million or more for homes in both areas and report their names to the federal government.
The move reflects concerns that dirty money from abroad is helping fuel the local residential real estate boom. Wealthy buyers in South Florida often use a network of domestic and offshore companies to prevent their names from becoming public.
The U.S. Financial Crimes Enforcement Network (FinCEN) issued the so-called "geographic targeting order," which will remain in effect from Feb. 8 to Aug. 5.
"We are seeking to understand the risk that corrupt foreign officials, or transnational criminals, may be using premium U.S. real estate to safely and secretly invest millions in dirty money," FinCEN director Jennifer Shasky Calvery said in a statement. "Over the years, our rules have evolved to make the standard mortgage market more transparent and less hospitable to fraud and money laundering. But cash purchases present a more
complex gap that we seek to address."
Insurance companies will now have to report the names of cash buyers who spend more than $1 million to the feds so they can investigate possible money laundering. Their identities will not be revealed to the public.
On Monday the buyer of a $47 million Key Biscayne mansion was revealed to be an untraceable Delaware shell company. Last month, a secret trust spent $19.5 million on a luxe Miami Beach home. County records don't show mortgages being recorded on either deal, meaning the buyers may have paid cash.
Federal agencies have targeted South Florida for special attention in the past. The area is known as a hotspot for money laundering.
Over the summer FinCEN said check-cashing stores in Miami-Dade and Broward would need to record more information about customers cashing tax refunds of more than $1,000. The two counties have the highest rates of identity theft and tax-refund fraud in the country.
In April, U.S. Immigration and Customs Enforcement ordered 700 electronic export businesses in Miami-Dade, many of them in Doral, to file reports to the federal government every time they receive more than $3,000. The feds suspected drug money and other illicit money may have been flowing through the companies.