We’re back in Miami’s condo market again in the wake of the Panama Papers release this weekend. The Miami Herald takes the Mossack Fonseca revelations as a jumping off point to discuss the prevalence of foreign cash deals in the Miami-Dade market where cash deals make up 53% of home sales last year and 90% of sales in new construction. Remember, the US government has launched a pilot program to track cash sales in Miami. That program can be seen as model that might eventually have an impact on the art market too.
“A property owned in the name of a shell company is not transparent,” said Jennifer Shasky Calvery, director of the U.S. Financial Crimes Enforcement Network (FinCen), the Treasury agency behind the new policy. “There may be legitimate reasons to be non-transparent, but it’s also what criminals want to do.”
The temporary initiative also applies to Manhattan and expires in August. It requires that real-estate title agents identify the true, or “beneficial,” owners behind shell companies and disclose their names to the federal government. In Miami-Dade, the rules apply to homes sold for $1 million or more. In Manhattan, where real estate is more expensive and where foreign buyers also flock, the threshold is $3 million.
No other jurisdictions are being targeted.
The feds will know the real buyers but won’t make the information public. Experts say the crackdown could be the first in a series of stronger regulations on cash deals.
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, according to FinCen data. And a recent case of money laundering involving fancy condos and the violent Spanish drug gang Los Miami drew further scrutiny to South Florida.
Jack McCabe, an analyst who studies the booming local housing market, said it’s impossible to know how many homes are purchased with dirty money.
“But I think many people believe it could be a sizable portion of the new condominium market in Miami,” McCabe said. “Even though developers and real-estate professionals suspect many of these units are bought with illegal funds, they realize their projects may not be successful without that support.”