Manhattan real estate money laundering machine

19 October 2015 5:32 pm

So how exactly was Manhattan real estate used to launder money stolen out of Kazakhstan?

As The Wall Street Journal tells us, it’s an intriguing story now before the courts.

Basically, you have two Kazakh men, Mukhtar Ablyazov, the former chairman of one of Kazakhstan’s biggest lenders, BTA Bank and Viktor Khrapunov, the former mayor of one of the nation’s largest cities, Almaty. The allegation is they stole billions from BTA and Almaty and parked it in New York real estate to avoid international investigations.

And therein lies the problem. Banks and brokerages are far more regulated than American real estate. They’re required to report suspicious activity. Real estate doesn’t face such requirements.
New York is among an elite group of destinations — along with Miami, London, Dubai and a few other cities around the world — that attract large numbers of international property buyers. Manhattan condos are popular with wealthy Chinese, Russians and South Americans. And lax US rules and real estate industry’s no-questions-asked approach make it easy for dodgy characters to funnel wealth through high-end Manhattan apartments.

Jaikumar Ramaswamy, chief of the U.S. Justice Department’s anti-money-laundering section, says oligarchs and despots like to put their money into high-end real estate for a number of reasons: they need an escape option if things take a turn for them in their home countries, they want to park their assets in an investment that’s known to preserve value, and they want to be able to enjoy and flaunt their wealth. “They’re not buying real estate in Detroit,” he says. “They’re buying in places that give them some sort of status: London, Paris, New York, Malibu.”

As New York magazine reports, roughly 30 percent of condo sales in large-scale Manhattan developments have been to purchasers who either listed an overseas address or bought through an entity like a limited-liability corporation. “The global elite,” says developer Michael Stern, “is basically looking for a safe-deposit box.”

The bottom line is that US authorities are turning a blind eye because laundering of money into US real estate with the blessings of regulators and of course Congress, has been one of the most critical pillars of the US "housing recovery". They’ll do anything to get the money in. And facilitate global corruption along the way.