A new report on money laundering in the United States has revealed that more than $2.3 billion was laundered through U.S. real estate in the last five years .
Additional information made available to The Guardian revealed that African countries where the illicit money came from include Nigeria, Guinea, Gambia, and the Republic of the Congo. Also, more than half of the U.S. cases involved politically exposed persons (PEPs), with Nigeria in the top five places of origin.
The study, titled, ‘Acres of Money Laundering: Why U.S. Real Estate is a Kleptocrat’s Dream’, exposed global money laundering and how politically exposed persons in African states channel illicit funds through a complex web of companies with opaque ownership structures.
It found that weak or no beneficial ownership frameworks and complicit gatekeepers are conduits of schemes that stifle development in African states.
It revealed that 60.71 per cent of U.S. cases involved properties in one or more non-Geographic Targeting Order (GTO) countries, demonstrating the limitations of this location-specific regulatory tool.
According to the report, well over 50 per cent of the reported cases in the U.S. involved politically exposed persons, which is particularly problematic, considering the lack of guidance from the Financial Crimes Enforcement Network (FinCEN) on PEP identification, while commercial real estate featured in more than 30 per cent of the cases and generally had significantly higher values than the residential real estate involved.
It further noted that the U.S. is yet to create any reporting obligations for risks in the sector and that the use of anonymous shell companies and complex corporate structures continues to be the number one money laundering typology.
The report stated that 82 per cent of U.S. cases involved the use of a legal entity to mask ownership, highlighting the importance of implementing a robust beneficial ownership registry under the Corporate Transparency Act.
It said: “To better understand the extent of real estate money laundering in the U.S. and identify trends, Global Financial Integrity (GFI) analysed 125 cases reported between 2015 – 2020 in the U.S., the UK and Canada.
Through a combination of case analysis and regulatory analysis, GFI provides conclusive evidence that the current U.S. approach of using GTOs is inadequate to address money laundering in the real estate sector.”
The report stated that comprehensive reform in anti-money laundering legislation is required to adequately address the money laundering risks in the real estate sector.