Biden has spoken out about cracking down on money laundering in the U.S. housing market, focusing on all-cash transactions

On the 6th local time, the Biden administration said that it would crack down on money laundering activities in the US real estate market, paying special attention to all-cash transactions in commercial and residential real estate. At a previous background briefing, a senior U.S. official explained that the transactions were often conducted through shell companies and used to launder money.

The U.S. Treasury Department's Financial Crime Enforcement Network (FinCEN), the operation's primary responsible body, said it had issued advance notice (ANPRM) to draft rules and would seek public comment on a potential rule to address money laundering and other illegal activities in the U.S. real estate market.

"The existence of systemic money laundering loopholes in the U.S. real estate industry, and the resulting ability of illegal actors to launder the proceeds of crime by purchasing real estate, threatenSecure national security and the integrity of the U.S. financial system." FinCEN said in the statement.

Combating real estate money laundering

According to current U.S. law, only in 12 metropolitan areas of the United States that the use of cash to purchase residential property of $300,000 or more requires the property insurance company to disclose the identity of the person using the shell company for the purchase.

The 12 metropolitan agglomerations are Boston, Chicago, Dallas-Fort Worth in Texas, Honolulu, Las Vegas, Los Angeles, Miami, New York City, San Antonio, San Diego, San Francisco and Seattle.

The Biden administration hopes to expand this disclosure across the United States, proposing new regulatory requirements for all-cash real estate transactions to combat money laundering in the real estate market.

To that end, FinCEN is initiating regulatory proceedings in the hope of soliciting comments on how best to develop new rules.

FinCEN explained in the statement that in the United States, if real estate transactions are conducted using loans or other financing methods, the banks they use are subject to federal anti-money laundering rules and are less susceptible to money laundering because these agencies are required to report suspicious activities to FinCEN.

"For example, when most U.S. households buy a home with a mortgage, the bank that issued the loan had to comply with regulations that required them to identify buyers and report suspicious activity." FinCEN explains, "In contrast, if you buy real estate without such financing, it is almost impossible to track the beneficiaries behind the shell companies that are often used to buy real estate." As a result, corrupt officials and criminals engaged in illegal activities can use the U.S. real estate industry to launder their ill-gotten gains. ”

A senior U.S. official said the U.S. government is currently considering what is the best way to address the problems caused by all-cash transactions in the commercial and residential real estate sector. These types of purchases are often made through opaque shell companies and are instruments for laundering illicit funds.

He said the U.S. housing market has long been vulnerable to manipulation and used as a safe haven for laundering proceeds from illegal activities, including corruption. The U.S. housing market is a relatively stable means of managing money, a market that can be opaque and has gaps in industry regulation. As a result, criminals and corrupt officials are able to exploit real estate too often.

For example, after corrupt officials and their associates misappropriated more than $4.5 billion belonging to the Malaysian Investment Development Fund (1MDB), the perpetrators used the misappropriated funds to buy mansions through shell companies in Beverly Hills and New York, he said.

He said increasing transparency in the real estate industry would help curb the ability of corrupt officials and criminals to launder their illicit gains. It would also strengthen U.S. national security and help protect the integrity of the U.S. financial system.

The official said the ANPRM is essentially soliciting public comment on what types of real estate purchases should be covered by future regulations, what information should be reported and retained, the geographic scope of such requirements, the dollar asset thresholds that apply to reporting and the key roles that should be followed.

It is reported that the relevant ANPRM will be announced for 60 days.

The U.S. property market continues to rise strongly

The senior official also said the specific feedback could lead to more targeted reforms and would help "ease the burden on the real estate sector."

Recently, the US housing market has risen strongly. According to the S&P Case-Shiller Index released on November 30, the average U.S. home price rose 19.5% year-on-year, close to the largest increase in the U.S. housing market in 30 years. The three cities with the highest year-over-year home price growth were Phoenix, Tampa and Miami.

Specifically, U.S. cities rose by phoenix (33 percent), Tampa (28 percent), Miami (25 percent), San Diego (25 percent), Seattle (23 percent), Charlotte (22 percent) and Atlanta (21 percent).

Previously, data released by the National Association of Realtors (NAR) showed that second-hand home sales in the United States rose by 0.8% in October, and after seasonal adjustment, it was reduced to 6.34 million units, a new high in nine months. NAR predicts that full-year volume in 2021 will be the highest since 2006.

NAR data shows that investors accounted for 17% of buyers in October, up from 13% in September and 14% in October 2020, of which full-money buyers accounted for 24%, especially investment buyers, most of whom were cash-paid buyers.

One factor contributing to the rise in U.S. real estate prices is that more and more people are buying homes with cash, which is a common way for buyers of rentals or vacation homes after investing in properties, NAR said. The above data shows that homes purchased as holiday homes or investment properties accounted for 17% of homes purchased in October, up from 14% a year ago.

A senior person in the US real estate investment industry told the first financial reporter that in the short term, the supply of REAL Estate in the United States will rise, the shortage will be partially alleviated, and the growth rate of house prices will slow down from the current nearly 20% to about 15%. But in the coming years, the shortage of U.S. property will continue, and house price growth will remain between 10 and 15 percent a year.

For the potential impact of the Olmiqueron strain on the US real estate market, he said that now that the strain has just begun to spread in the United States, the number of cases found is limited, for the real estate market, if the Olmikron strain begins to spread on a large scale, it will increase the market demand for single-family properties, so that the speed of house price rise is accelerated. The continued upward trend of the US housing market will not be fundamentally affected.