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The White House made an astronomical claim on Monday: that acts of corruption cost 2% and 5% of global gross domestic product. That would be about $1.7 to $4.2 trillion dollars, according to World Bank data.
How this figure was arrived at wasn't elaborated, but the US government said it plans to crack down on the problem in full force. Its first target: all-cash real estate deals, which will face intensified scrutiny for their ties to criminals and corruption under new proposed rules.
Getting Real About Real Estate's Real Big Problem
It sounds like the stuff of Narcos or Cocaine Cowboys because, well, it is. Over $2.3 billion was laundered through American real estate between 2015 and 2020, according to the US Treasury, something experts say has helped human traffickers, drug cartels, and dodgy politicians.
While shell companies are perfectly legal, those illicit actors often use them as vehicles to make transactions and hide money in assets spread out across legitimate industries — and they can also be used for tax dodging. To deal with the problem, the Biden administration wants to clear the way for one of America's chief corruption agencies to access data on more real estate activity:
- The Treasury's Financial Crimes Enforcement Network, or FinCEN, is proposing to expand a program that tracks all-cash residential property sales over $300,000 in 12 major US metropolitan areas to the entire country.
- FinCEN is also considering mandating that investment funds like hedge funds and private equity vehicles participate in anti-money laundering programs.
Helping Hand: The US also plans to take the extraordinary step of offering assistance to foreign countries in bolstering their own corruption monitoring. That could help prevent cases like that of former Ukrainian prime minister Pavlo Lazrenko, who stole hundreds of millions while in government and was caught with $22.8 million in illicit US assets, including a nine bedroom California mansion and a Picasso lithograph (at least he had good taste).