There’s a hot new episode on Netflix called Ozark where Jason Bateman plays a financial advisor who launders drug money on behalf of a Mexican drug cartel. In one episode (*spoiler alert) he uses a real estate deal to clean the money and make it “legal.” Real estate is one of the ways money is laundered through the system and if real estate professionals aren’t careful an all cash investor who comes along and uses you to purchase a property could in fact be committing money laundering.
Money laundering is the concealment of the origins of illegally obtained money. Legitimizing or “laundering” the money through the financial system is a critical component to hiding activities and not drawing any attention to the illegal profits gained. Although most money laundering activities are more prominent in the financial sector and banks and other financial institutions are subject to anti-money laundering laws, real estate professionals should be familiar with the tactics used during a possible money laundering scheme.
Here are a few clues that could lead real estate professionals to become suspicious about a money laundering transaction.
- The customer’s source of money comes from a jurisdiction the State Department has deemed to be a Major Money Laundering Country such as Afghanistan, Australia, or Brazil.
- There is an unusual involvement of a third party such as a friend, relative, or business associate.
- The buyer brings actual cash to closing.
- The property purchase is inconsistent with the buyer’s occupation or income.
- Immediate resale of the property.
- Purchase made without viewing the property and no interest in the characteristics of the property.
- Substantial under or over value purchase of a home.
Money laundering still continues to be a growing crime in America and many luxury properties in places like Manhattan and Miami tend to be at greater risk. But while real estate professional’s responsibility isn’t to vigilantly look for these threats it is certainly something to be aware of.