Secret buyers of luxury real estate in Greater Boston will soon get extra scrutiny.
The US Treasury Department has added Suffolk and Middlesex Counties to a program that requires people who buy homes with cash through shell companies to share their name with the government. It’s a bid to combat money laundering in high-end real estate, which critics say is becoming increasingly popular with buyers who can hide their identity behind a limited liability company or other shell entity.
Such shell-company deals are legal, and there are no state or federal laws requiring public disclosure of an owner’s name. The rules, however, would require title companies to disclose to the government the identity of people who make all-cash purchases through a shell company. That enables prosecutors of financial crimes to screen for people they’re investigating for potential criminal activity.
The Treasury launched the program in 2016 in New York and Miami and has gradually expanded by adding more cities and less-expensive purchases. The latest expansion, announced Thursday, will bring the review to 12 housing markets and all deals worth $300,000 or more — which would cover nearly all cash sales in Suffolk and Middlesex counties. The government also, for the first time, will review deals in “virtual currencies” such as Bitcoin.
The expanded program “will further assist in tracking illicit funds and other criminal or illicit activity,” the Treasury’s Financial Crimes Enforcement Network said in a statement.
The issue of shell-company purchases in recent years has become more relevant in Boston, as a wave of luxury condo buildings have drawn high-end investors and wealthy buyers who want to remain discreet. Some members of the City Council, concerned units are sitting empty amid a housing shortage, have called for greater public disclosure of ownership. Boston Mayor Martin J. Walsh had asked the Treasury to add the city to its anti-laundering program.
A report in September by the Institute for Policy Studies looked at 12 high-end condo buildings in Boston and found that 35 percent of the units are owned by LLCs, trusts, and other kinds of shell companies. Study author Chuck Collins said adding Boston to the program was “a positive outcome” from the report.
“The issue of illicit funds and secrecy really touched a nerve around Boston,” Collins said. “No one wants Boston to become Miami or New York City as a center of money laundering.”
The potential impact on the housing market is unclear.
A study released this summer found that shell-company purchases in Miami fell sharply after the new rules took effect there, but that overall sales were little changed, suggesting would-be shell buyers simply found another way to buy real estate. In several of the cities that the Treasury has been studying, high-end sales have levelled off for other reasons.
In Boston, real estate brokers say, luxury condo buildings typically conduct their own scrutiny to identify potential buyers, and that episodes of real-estate-related money laundering and other financial crime has been relatively rare.Tim Logan can be reached at firstname.lastname@example.org. Follow him on Twitter @bytimlogan.