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The Money Launderer Next Door

Wed, 09/14/2022 - 13:14


As much as a fifth of private residential property in East Hampton Town is held by anonymous limited liability companies, or L.L.C.s. This raises the question of whether the town is unwittingly playing a part in the secretive practice of shielding foreign wealth that may have been obtained improperly.

A New York Times investigation several years ago that looked at a single Manhattan luxury skyscraper found that at least 16 of its owners had been the subject of government inquiries abroad, including environmental violations and fraud, and that four of them had been arrested in connection with the allegations. This is made possible by laws in the United States that can help obscure the movement of money from around the world, through shell companies.

The practice of hiding wealth has taken on new urgency in the wake of the Russian invasion of Ukraine and the imposition of sanctions on companies and individuals tied to the Kremlin. In August, U.S. agents searched properties, including a multimillion-dollar Southampton house, associated with Viktor Vekselberg, a close ally of Russian President Vladimir Putin. Another notable East End example involved Paul Manafort, the onetime Trump campaign chairman who took a plea deal to charges including obstruction of justice, failure to register as a foreign agent, and conspiracy to launder money. Prosecutors presented evidence that Mr. Manafort wired millions of dollars from secret overseas bank accounts to pay for renovations at his 10-bedroom Water Mill house and other properties, including in the Washington, D.C., suburbs and Manhattan.

President Trump pardoned Mr. Manafort for his crimes.

U.S. real estate has been called the most important form of asset of overseas kleptocrats. The lack of transparency in our laws allows corrupt and illegally gained cash to flow into communities like ours. This undermines the U.S.’s ability to contain international conflicts and lays out a welcome mat for money launderers. The shady money helps push real estate prices higher, contributing to the current crisis in which homeownership, a key way to escape poverty, is made much more difficult for many Americans.

Anti-secrecy proposals have circulated over the years, with little success in combating the problem. On Jan. 1, 2021, Congress overrode a Trump veto to approve the Anti-Money Laundering Act, contained within a defense authorization bill. A key aspect of the act is to target so-called beneficial ownership, that is, who gets to enjoy the Hamptons house, yacht, or Manhattan penthouse. It provided law enforcement with more tools to trace illicit money to its sources — including financing of terrorism, human and drug trafficking, environmental degradation, human rights violations, and securities fraud. Information collected under the new program will include owners’ names, birth dates, addresses, and identification details such as a passport or driver’s license; the data are to be kept secure and not publicly available. Requests for access can come only from federal law enforcement, state and local jurisdiction by court order, and financial institutions exercising due diligence.

None of this means that the identities of cloaked real estate buyers and sellers will necessarily be revealed. The rules should help weed out the money launderer next door, and that is something that people of good conscience should eagerly support.


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