New York City Real Estate

How foreign investors launder their money in New York real estate


One of the characteristics of the modern age is the greed of the richest people. They are working to earn as much as possible and at the same time they are trying to protect their cash from tax as much as possible as well. One of the ways of doing this is by moving their wealth into a jurisdictions that is tax friendly and, as a result, with little tax implications on their income. Another way is by using real estate, especially overseas real estate in good markets such as Manhattan. Investing in a condo in Manhattan has become a favored way for many rich families to deal with tax.

Between 2008 and 2014, roughly 30% of condos in Manhattan were sold either to foreign investors or LLCs (which are typically hiding a foreign investor).
Indeed, U.S. real estate especially has certain advantages over small tax havens. Places like Bermuda or Seychelles are tiny and would be defenseless if they ever came under U.N. sanctions. New York real estate, in addition to being a handy wealth storage mechanism that provides a place to land anytime one feels like visiting New York City, is free from such threats — and reaps the gains of any increases in the market, which have been very good in New York over many years.
Of course, some of the foreign investors and associated LLCs are laundering illegal money. The money laundering scheme of Paul Manafort — President Trump's former campaign chairman — involved New York real estate. The New York Times spent significant effort looking into a few luxury Manhattan residential buildings, and found several extremely shady and occasionally illegal foreign investors.

So what might be done? First, money laundering laws have to be enforced agressively. Second, cities like New York could consider banning foreign shell companies from purchasing residential property.

Investing in New York real estate does make a lot of sense but it should be done properly and without investors trying to launder away criminal money.

Source: Theweek, November 2017

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