Major real estate purchases become a tool for money laundering
In a little-noticed statement, the Treasury bureau responsible for investigating financial crimes shared a remarkable money laundering statistic last month.These purchases are probably contributing to the lack fo affordable housing in California and New York. The problem is compounded by restrictions on building that reduces the supply.
Thirty percent of the cash purchases of high-end real estate by shell companies in six major cities involved a suspicious buyer, according to an investigation conducted by the Financial Crimes Enforcement Network to find out who was behind the deals.
In other words, money laundering plays a significant role in shaping U.S. cities.
But money laundering is only one reason that foreign investors might pour money into luxury condos and exclusive addresses. Foreigners also prize expensive real estate because it allows them to evade taxes in their home countries or escape government restrictions on using their own money.
All that money being poured into U.S. real estate is contributing to affordability difficulties for middle-class families and to the loss of vitality in many of the country's richest neighborhoods, which have seen an influx of cash but not necessarily actual residents. Even so, the U.S is mostly in the dark about the quantity of such investment or the investors behind it.