Inspired by the New York Times’s series on luxury real estate transactions at the buildings targeting non-domiciled buyers, Quartz addresses the money laundering loophole created by the numerous shell corporations used to buy real estate and the agents who deal with them. Art transactions have many similarities to real estate transactions, especially now that many works of art can be priced equivalent to a home. The exception with art is that the valuable object is more portable than real estate adding to its appeal for those looking to shield or disguise assets.

Following Quartz’s logic, which begins with the fact that nearly 70% of the transactions by international buyers in New York’s luxury real estate market are paid for in cash, the place where art market regulation might truly take place is in the realm of Anti-Money Laundering protocols:

While banks are required to file a Suspicious Activity Report, or SAR, with the US Treasury if they suspect a client is depositing or transferring corrupt money, real estate agents and the lawyers who work on these deals have no such requirements. The real estate commission model means agents are paid to sell, and often get higher percentages of subsequent sales the more properties they move, so there’s no incentive to flag suspicious deals.

US authorities taxed with keeping the proceeds of corruption and graft out of the US say SAR reports are a “huge help” to law enforcement, and “requiring a broader range of players,” like real estate agents, to file them would keep more corrupt money out of the US, as one assistant US attorney told the Nation.

In 2012, the NAR issued a list of guidelines for when realtors should voluntarily file an SAR to alert the government to a potential money-laundering transaction. For example, they flag transactions that have a large geographic distance between the buyer and the property, involve a shell corporation in the deal, “use large amounts of cash,” or involve a buyer who “brings actual cash to the closing.” All of these red flags are present in many recent New York City real estate transactions, recent reports suggest, but realtors rarely file SARs.

The case for treating US realtors like US bankers when it comes to foreign cash  (Quartz)