Could ‘all cash’ real estate purchases be suspicious activities?

On Behalf of | Jul 28, 2017 | White Collar Crimes

Home renovation shows, particularly those describing how real estate investors buy distressed properties in cash before fixing them are quite popular. In fact, they have arguably inspired a wave of “flipping” that has coincided with the housing market resurgence.

Despite how lucrative the real estate market is, authorities believe that some may use the cash purchase of real property as a way to launder money earned from illegal activities. Because of this, the Financial Crimes Enforcement Network (FinCEN) has issued several Geographic Targeting Orders (GTOs) to identify such buyers.

The GTOs require title insurance companies in a number of regions across the U.S. to identify natural persons behind shell companies that purchase high-end real estate with cash. Commonly people and corporate entities secure real estate with a combination of cash and promissory notes (a mortgage). But FinCEN has learned that about a third of all cash buyers who purchase luxury real estate have shown up on recent suspicious activity alerts.

The regions identified in the GTOs include traditionally high real estate markets, including all boroughs of New York City, Miami-Dade County in Florida, several counties within the San Francisco Bay area of California and Bexar County in Texas.

Indeed, it may not be common for investment firms to purchase properties with cash, especially high end real estate, but these transactions are not automatically indicative of money laundering. This is where an experienced white collar crime defense attorney can protect the rights of individuals using substantial wealth to further entrepreneurial pursuits.

The preceding is not legal advice.

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