Biden unveils anti-corruption strategy as Treasury targets anonymous real estate purchases

A new Treasury Department push to improve transparency in real estate transactions could complicate life for Mr Biden’s predecessor

Andrew Feinberg
Washington, DC
Monday 06 December 2021 09:09 EST


The Biden administration is taking aim at the use of American real estate as a vehicle for laundering proceeds of government graft and transnational crime as part of the first-ever US strategy on countering corruption.

The unveiling of the new five-point strategy and a proposed rulemaking to require more transparency in reporting of all-cash real estate transactions to “curb illicit finance” is part of a major White House push to make anti-corruption efforts a core mission of the administration and comes just days before President Biden will open the inaugural US-hosted “summit for democracy”.

Mr Biden, who in June issued a national security memorandum to establish anti-corruption as a “core United States national security interest,” said in a statement that corruption “threatens United States national security, economic equity, global anti- poverty and development efforts”.

“By effectively preventing and countering corruption and demonstrating the advantages of transparent and accountable governance, we can secure a critical advantage for the United States and other democracies,” he added.

According to a senior administration official who briefed reporters on Mr Biden’s plans late Sunday, Mr Biden’s anti-corruption focus can be tied directly to his domestic and foreign policy agendas because corruption “robs citizens of equal access to vital services like healthcare and education” and “downgrades the business environment and can exacerbate inequality”.

“It’s often linked to human rights violations, it can drive migration, it undermines rule of law and in so doing makes all forms of government less effective and less trusted,” the official said. “And right here at home, the impacts of transnational corruption have been shown to tilt the economic playing field, in part by raising housing costs and pricing out families in some instances from home ownership as corrupt actors make illicit real estate purchases”.

The strategy, the first of its’ kind, is organised under five “mutually-reinforcing” pillars of “modernizing, coordinating, and resourcing U.S. Government efforts to fight corruption,” “curbing illicit finance,” “holding corrupt actors accountable,” strengthening “multilateral anti-corruption architecture,” as well as making improvements to “diplomatic engagement” while “leveraging foreign assistance resources to achieve anti-corruption policy goals”.

The official said the release of Mr Biden’s new strategy “marks a new chapter” in US anti-corruption efforts. The Biden administration will require federal agencies to deliver annual reports on progress made toward achieving the strategy’s objectives.

One specific action item the administration is rolling out ahead of Thursday’s democracy summit comes from the Treasury Department’s Financial Crimes Enforcement Network, which on Monday released an advance notice of proposed rulemaking to solicit public comment on what regulations it could promulgate to “address the vulnerability of the U.S. real estate market to money laundering and other illicit activity”.

A senior Treasury official said the agency is “in a position … to understand and attack corruption at its intersection with the financial system” because it “is equipped with tools to weed out corruption at home and abroad by targeting the financial systems and flows that allow bad actors to profit from it”.

“For too long, the US real estate market has been susceptible to being manipulated and used as a haven for laundering proceeds of illicit activity, including corruption. Our real estate market is a relatively stable store of value, it can be opaque, and there are gaps in the industry regulations. As a result, criminals and corrupt officials are able to exploit real estate far too often,” the official said.

Specifically, the official said FinCEN is considering rules to address the problem posed by all-cash real estate transactions, particularly those made by anonymous shell corporations.

“We’re basically asking for public input on which types of real estate purchases should be covered in any future regulation, what information should be reported and retained, the geographic scope of federal requirements, the appropriate reporting dollar value threshold and the key players who should be subject to the reporting and record keeping requirements,” they explained.

A reporting requirement for all-cash real estate transactions — especially those made by shell corporations — would complement rules FinCEN established earlier this year under provisions in the 2020 National Defence Authorisation Act which required the Treasury Department to create and maintain a database of the persons who control corporations, limited liability companies and other entities that are often used to hide identities of real estate buyers.

Additionally, the official said the Biden administration would unveil new sanctions this week which target “individuals who are engaged in malign activities that undermine democracy and democratic institutions around the world, including through corruption repression, organised crime and human rights abuses”.

One person who could feel the effects of any rule requiring greater disclosure of real estate transactions is Mr Biden’s predecessor, former president Donald Trump.

Mr Trump, who spent years running his eponymous real estate empire before entering show business and later politics, raked in significant amounts of money from anonymous companies that purchased condominium units in his company’s properties.

According to USA Today, roughly 70 percent of those who bought real estate at Trump-owned properties in the 12-month period after he became the 2016 GOP presidential nominee were limited liability companies, compared with just four percent of buyers over the two prior years.

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