Investors Be Aware of Money Laundering

The crime of money laundering is growing in the U.S. Since laundering money is only profitable when large amounts can change hands in ways not easily traced, these crimes are normally associated with banks and other financial institutions.

However, real estate deals also can involve larger fund transfers, many times in cash. Especially with the high number of foreclosures and investors buying distressed homes for cash, attention should be paid to how money laundering works and is disguised by high dollar transactions.

Criminals can’t just collect huge amounts of cash from illegal activities like drugs and spend that cash. It’s too easy to trace. They must “launder” the money through other transactions in financial markets. By moving money through legitimate channels, they can put it into one end and take it out of the other end like clean money. The real estate industry was exempted from new anti-laundering rules enacted in 2012, as it was believed that the other agencies involved in regulating real estate transactions would be sufficient.

However, there is money laundering going on in real estate transactions, especially those with large cash components. While recent guidelines are being distributed to real estate agents to help them to spot possible money laundering, real estate investors should take notice as well. Especially since real estate investors often close transactions without agent involvement and do so with cash, understanding how laundering is accomplished could be important.

The National Association of Realtors has issued a fact sheet to help titled “Anti-Money Laundering Guidelines for Real Estate Professionals.” There is a video at the website at this link: http://www.realtor.org/videos/money-laundering-what-to-look-for. Check it out so you’ll at least have a chance of spotting a potential problem before it becomes a major issue in one of your transactions.