All-Cash Buyers of Expensive Homes in California No Longer Able to Hide Behind Shell Companies: Treasury Department

BEVERLY HILLS, CA — In order to crash down on money laundering, the U.S. Treasury Department announced Wednesday it will now require all-cash buyers of pricey real estate properties Los Angeles, San Diego and the Bay Area to reveal their true identities.

Starting on Aug. 26, title insurance companies will be required to identify the "natural persons" behind all-cash transactions of $2 million or more for high-end residential real estates.

Title insurance companies will be required to provide copies of a buyer's driver's license, passport or other government-issued identifications to authorities when requested. The information will not be available to the public.

According to state laws, limited liability companies, or LLCs, do not have to disclose who their owners are, making them popular shell companies for criminals to funnel "dirty" money into property investments, the Treasury Department said.

The department's has had initial success uncovering illegal activities in New York City and Miama-Dade County in Florida in what it called Geographic Targeting Orders, or GTOs.

In particular, a significant portion of covered transactions have indicated possible criminal activity associated with the individuals reported to be the beneficial owners behind shell company purchasers, according to the Treasury Department.

“The information we have obtained from our initial GTOs suggests that we are on the right track,” the department's financial crime enforcement Acting Director Jamal El-Hindi said. “By expanding the GTOs to other major cities, we will learn even more about the money laundering risks in the national real estate markets, helping us determine our future regulatory course.”

Following the success in Florida and New York, the department is expanding the GTOs to cover Los Angeles County, San Diego County and the San Francisco Bay Area, including San Mateo, Santa Clara and San Francisco counties.

Using shell companies to by real estate is not necessarily indicative of any criminal activities. Owners set up LLCs to protect their personal assets and celebrities use them all the time to buy properties without having to reveal their personal information.

The announcement of the new requirement comes a week after federal prosecutors announced they are seeking to recover more than $1 billion allegedly stolen from a Malaysian investment fund and laundered through the Los Angeles area.

Federal authorities allege the stolen funds were used for elaborate purchases such as high-end real estate and hotels in Los Angeles and New York, artwork by Vincent Van Gogh and Claude Monet, an interest in the music-publishing rights of EMI Music and the production of “The Wolf of Wall Street,” starring Leonardo DiCaprio.

— City News Service contributed to this report. Photo courtesy via Pixabay