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Panama Papers shed light on money laundering in U.S. luxury home market


In February, we briefed you on the concerns of “terrorism financing” and money laundering the luxury home market. Now, with the outing of 11 million internal documents – dubbed the “Panama Papers” – the issue is back in the spotlight and has a little more data to back up the claims that $1 million+ cash deals are targets for money laundering and a means for financing terrorism.

For background, here’s how Christopher Miller with Mashable explains the investigation.

Dubbed the Panama Papers, a cache of 11 million internal documents — 2.6 terabytes worth — from Panamanian law firm Mossack Fonseca shine a light on secret offshore holdings from 128 politicians and public officials across the globe, including 12 current and former world leaders.

The Mossack Fonseca documents were first leaked to German newspaper Süddeutsche Zeitung more than a year ago. Investigative journalists in countries around the word have been sifting through them ever since.


The Panama Papers may at first seem like they just uncover shady financial practices of world leaders, politicians, and business owners; but diving within the data “bolster[s] an argument analysts and law enforcement officials have long made: Money from people linked to wrongdoing abroad is helping to power” the South Florida real estate market, according to the Miami Herald. Buried in the documents are critical data points that link 19 foreign nationals to the purchase of Miami real estate, 8 of whom “have been linked to bribery, corruption, embezzlement, tax evasion” and other wrongdoings.

Why is this a concern for REALTORS® and industry professionals?  Because this issue is driving the future regulation of U.S. real estate brokers and agents by federal regulators.  Already, the Financial Crimes Enforcement Network (FinCEN) at the Treasury Department issued a Geographic Targeted Order (GTO) back in January of this year, that is requiring certain U.S. title insurance companies to identify the natural persons behind companies used to pay “all cash” for high-end residential real estate in Manhattan and Miami-Dade County.

The National Association of REALTORS® (NAR) has been working closely with FinCEN and the Treasury to develop voluntary guidelines for real estate professionals to identify signs of money laundering, in an effort to keep more stringent regulations and responsibilities from being heaped onto real estate agents and brokers.  NAR has argued that “real estate agents and brokers are not in a position to detect money laundering since the funds involved in real estate transactions are handled through regulated financial institutions,” and the Treasury agrees.  However, the extent of the corruption of the luxury home market in Miami, as revealed by the Panama Papers, is not making matters any easier for NAR to combat.

Miami was ranked the number one area in the country for cash sales by CoreLogic’s October 2015 home sales report. And now, thanks to the Miami Herald and the Panama Papers, we know where at least some of that money is coming from.

Consequently, NAR strongly encourages that, in order “to help minimize the need for targeted regulations, brokers and agents need to become aware of how real estate is currently being used in illegal financing schemes and begin to take steps to play their part in the global fight against money laundering and terrorist financing.”

Learn more about money laundering and terrorism financing in real estate at http://www.realtor.org/topics/money-laundering-and-terrorism-financing.