More Than 400 Federal CasesDefended Over the Last 20 Years
Call Us Now (305) 340-2006
Llámenos Ahora

Secret Offshore Money Fuels Miami's Luxury Real Estate Boom

A recent Miami Herald news article detailed the discovery of thousands of documents of off-shore companies, known as “shell companies,” that were being used to buy luxury real estate while disguising the identity of the true owners and the source of their assets. These types of companies are currently legal.

At the end of 2011, a company called Isaias 21 Property paid nearly $3 million in cash for an ocean front Bal Harbour condo. In public records, Isaias 21 listed its headquarters as a Miami Beach law office and its manager as Mateus 5 International Holding, an offshore company registered in the British Virgin Islands, where company owners don’t have to reveal their names.

Many confidential files from inside a secretive Panamanian law firm called Mossack Fonseca were recently uncovered. The leak has been called the “Panama Papers.” The owner of the Bal Harbor Condo was identified as Paulo Octávio, a resigned governor of Brasília after being accused of corruption in 2011.

The law firm of Mossack Fonseca specializes in creating offshore shell companies for the world’s richest and most powerful people. These leaked records offer a glimpse into the tightly guarded world of high-end South Florida real estate.

This leak comes as the U.S. government unleashes an unprecedented crackdown on money laundering in Miami’s luxury real-estate market. A former drug enforcement agent states, “The guys who want to clean up dirty money are always going to try to penetrate the system at its weakest spot.” “You’ve got so much real estate being bought and sold in South Florida. It’s easy to hide in plain sight.”

Recently, the U.S. Treasury Department became concerned about criminals laundering dirty money through Miami-Dade County real estate, and in March, it started tracking the kind of transactions most vulnerable to manipulation: shell companies buying homes for at least $1 million using cash. These deals are considered suspicious because 1) the real buyers can hide behind shell companies and 2) banks aren’t involved in cash transactions, circumventing any checks for money laundering.

Since Miami has a long history of money laundering, its financial institutions report more suspicious activity than any other major U.S. city besides New York City and Los Angeles.

Foreign nationals bought nearly $6.1 billion worth of homes in Miami-Dade, Broward, and Palm Beach counties last year, more than a third of all local home spending, according to the Miami Association of Realtors.

Owning U.S. property through offshore companies is popular with foreign nationals because it allows them to claim significant breaks on their estate taxes. However, offshores are also useful for shifting money around beyond the reach of regulators and tax authorities.

Convicted money launderer Alvaro López Tardón bought a $1 million condo at the Continuum in South Beach. A federal judge in Miami sentenced the accused Spanish drug lord to 150 years in prison for money laundering. The judge said South Florida is awash in “funny money.”

Prosecutors argued that he was laundering profits from a lucrative cocaine-smuggling business. They said he had been the leader of a violent drug ring called Los Miami and seized his assets, including a fleet of luxury cars and 13 condos, after he was found guilty of money laundering.

The judge was quoted saying, “I call it funny money, and we have a plethora of funny money here,” U.S. District Judge Joan Lenard said during his sentencing hearing in 2014.

Federal authorities are certainly watching these activities. In 2001, the USA Patriot Act mandated that all parties involved in real-estate closings perform due diligence on their clients. Lobbying from the industry won a temporary exemption that has been in place for nearly 15 years. The American Bar Association has also opposed stronger disclosure requirements for real-estate lawyers, saying they would violate attorney-client privilege.

However, a new federal initiative centering on Miami-Dade may be the first sign that the exemption is ending. Between the federal crackdown on secret cash home deals and strengthening anti-money-laundering rules around the world, it may grow harder to pump dirty cash through Miami real estate.

Read the article here.

Categories: Federal Crimes