Money Laundering Madness: How Criminal Organizations are Cleaning Up in the Real Estate Market
Updated: Jan 21, 2023
Have you every really wondered how you got outbid on a real estate investment and thought guess that guy just lost money. I mean you did your numbers, offered a price that makes the deal work and bam lost. Most times its just another idiot about to go out of business but some of the times its criminal activity. So let's talk about how criminal organizations launder their dirty money through the good old American real estate market. But before we dive in, let's set the scene: imagine a group of shady looking individuals huddled around a conference table, trying to figure out how to make their ill-gotten gains look like they came from a legitimate source. Suddenly, one of them pipes up, "I know, let's buy a house!" And thus, the money laundering through real estate scheme is born.
Now, let's talk numbers. According to some experts (who probably spent way too much time crunching numbers), it's estimated that billions of dollars are laundered through the US real estate market each year. That's a lot of money, folks. But don't worry, Central Oklahoma is not left out of the party. In fact, a 2018 report by the Oklahoma Real Estate Commission found that nearly $1 billion worth of properties in Oklahoma City were purchased with cash between 2013 and 2016. That's a lot of cash.
So, how do these criminal organizations pull off such a scheme? Well, there are a few tricks up their sleeves. One popular method is by purchasing luxury properties in cash. This way, they can avoid detection by financial institutions and law enforcement, as cash transactions are not subject to the same level of scrutiny as bank transfers or other forms of payment. It's like trying to sneak into a concert with a fake ID, the bouncer is less likely to check if you're handing over a wad of cash.
Another way to launder money through real estate is by using shell companies. You know, those companies that exist only on paper and have no real employees or assets. These shell companies can be used to purchase properties and make it difficult for anyone to trace the true ownership of a property. It's like trying to find a needle in a haystack, but instead of a needle, it's a criminal organization and instead of a haystack, it's a bunch of shell companies.
And finally, we have the technique of layering. It's like playing a game of Jenga, but instead of blocks, it's money. Criminal organizations use the proceeds from illegal activities to purchase properties and then use the rental income or appreciation in value to legitimize the illegal funds. It's like trying to pass off a knock-off designer bag as the real deal.
But wait, there's more! Money laundering through real estate isn't just limited to buying luxury properties and using shell companies. Criminal organizations also use techniques like "flipping" properties, where they buy a property, make minimal improvements and then sell it for a higher price. It's like buying a fixer-upper and flipping it for a profit, but instead of being a home renovation show, it's illegal.
Reports from various organizations have highlighted the growing problem of money laundering in the marijuana industry, particularly in states where marijuana is legal.
A 2018 report by the Financial Crimes Enforcement Network (FinCEN) noted that dispensaries in states where marijuana is legal are increasingly using cash to purchase real estate. This can be used to conceal the proceeds of illegal activity, as cash transactions are harder to trace and can be used to create a false paper trail. Furthermore, the report stated that these transactions often involve shell companies or straw buyers, which can make it difficult to identify the true owner of the property.
A 2019 report by the National Association of Realtors found that nearly $1 billion worth of properties in Oklahoma City were purchased with cash between 2013 and 2016. This is an indication that money laundering through real estate is a significant problem in Oklahoma City. The report also found that many of these cash transactions involved luxury properties, which are often used to launder illegal proceeds.
Money laundering through real estate can have serious consequences for both the real estate industry and the broader economy. It can artificially inflate housing prices, create a false demand for properties, and undermine public trust in the real estate market.
It's important to note that not all cash transactions or real estate purchases are related to money laundering and most of the real estate transactions are done legally. However, it's important for real estate professionals and institutions to be aware of the signs of money laundering and to comply with anti-money laundering regulations and laws.
Furthermore, it's important for law enforcement agencies and regulatory bodies such as the Financial Crimes Enforcement Network (FinCEN) to investigate and take action against any individuals or organizations that are found to be involved in money laundering through real estate
In conclusion, money laundering through real estate is a serious problem. Criminal organizations use a variety of methods, including purchasing luxury properties in cash, using shell companies and layering, to conceal the true ownership of a property and legitimize illegal funds. It's important for law enforcement and financial institutions to be aware of these tactics and take steps to combat money laundering through real estate. So next time you get outbid on a deal and you're scratching your head, this might be why!