The Global Financial Integrity (GFI) and the Financial Transparency Coalition published a new report this month by Lakshmi Kumar and Kaisa de Bel titled ‘Acres of Money Laundering: Why U.S. Real Estate is a Kleptocrat’s Dream’.
In the report, GFI built a database of more than 100 real-estate money laundering cases – from the US, UK, and Canada – reported between 2015 and 2020. The database, says GFI, shows that the current US regulatory approach “has critical shortcomings that will require comprehensive reform”.
In 13% of the US cases, the source of illicit money came from sub-Saharan Africa, with origins including Guinea, Gambia, Republic of Congo and Nigeria, the report says. The Republic of Congo was also one of the top sources of foreign illicit money being invested in Canadian real estate, it adds.
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More than half of the US cases involved Politically Exposed Persons (PEPs) – defined as people who are or have been entrusted with a prominent political role. Nigeria was in the top five PEP places of origin globally.
The report cites the case of Diezani Alison-Madueke, Nigerian oil minister from 2010 to 2015 under former president Goodluck Jonathan. It says that Madueke and others acquired over $1.5bn in profits, which was laundered into real estate and other assets, including properties in Manhattan, California and London.
- To hide the source of the payments from a US title insurance company, the IDI says, an associate of Alison-Madueke wired the money first to a property management company, which then sent the money to the title insurer.
- For another property purchase in New York, the bank of the title insurance company declined the transaction, so Alison-Madueke’s associate simply sent the money straight to the property developer, the IDI says.
- In April, Abdulrasheed Bawa, chairman of Nigeria’s Economic and Financial Crimes Commission, said $153m and over 80 properties had been recovered from Alison-Madueke.
- She denies charges of corruption and has not returned to Nigeria to face charges outstanding against her.
The report gives a series of recommendations for the US to adopt, including the use of Geographic Targeting Orders (GTOs) which are used by the Financial Crimes Enforcement Network (FinCEN) to prevent money laundering. GTOs are used to impose extra record-keeping and reporting requirements on institutions in specific parts of the US.
- GTOs should be expanded nationwide and made permanent, the report says;
- Real estate agents should be required to identify the beneficial owner of a residential real estate purchase when title agents are not involved in the transaction;
- Legal professionals should be made the lead reporting entity for identifying money laundering risks in commercial real-estate transactions;
- Investment advisors should be required to carry out client due diligence on all prospective investors in private real estate funds;
- Real estate agents and legal professionals involved in real estate should be subject to the same due diligence requirements as financial institutions.
GTI argues that lax US real-estate regulations are leaving the door open to money launderers.
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