The Financial Crimes Enforcement Network (FinCEN) must step up its anti-corruption regulation of the American real estate market. CREW submitted a regulatory comment on February 21 laying out the urgency of these regulations. This comment, and FinCEN’s potential rulemaking come at a critical juncture in modern history. As Russian President Vladimir Putin wages war against Ukraine, the United States must be able to track the Russian oligarchs, businesses, and close friends of Putin who own residential and commercial real estate in our country. It is imperative that FinCEN design a regulatory framework that will allow US law enforcement to see through the opaque shell companies and corporate structures that allow corrupt and criminal actors—including Putin’s cabal of kleptocrats—to purchase and own billions of dollars of American real estate.
United States residential and commercial real estate is a haven for corrupt and illegal money. For decades, corrupt foreign actors, including Russian oligarchs who are close to Russian President Vladimir Putin, have parked their ill-gotten and corrupt money in American properties. This is because the United States allows opaque shell companies to make all-cash purchases of real estate on behalf of owners that don’t have to disclose who they are. This is why CREW is calling on FinCEN to adopt a strong and comprehensive regulatory framework that would end these practices and pull these corrupt actors out of the shadows and into the light.
These real estate practices don’t just harm American foreign policy. They have a real and devastating impact on Americans. As CREW explains in our comment, one investment fund, funded in part by opaque foreign money, has been purchasing more than 2,000 residential properties per month. It has upended lives and deeply harmed communities across the country. During the pandemic, for example, this fund allegedly routinely violated the national eviction moratorium and appears to have concentrated its eviction filings in predominantly Black and Brown communities in the United States.
These practices directly harm Black and Brown communities and increase the racial wealth gap. Over the last year, investors were the buyers in 30 percent of home sales in majority Black neighborhoods, compared with 12 percent of sales in other zip codes. When investors buy properties in predominantly minority neighborhoods, the practice causes property values to soar, pricing out first time home owners and lower income families, which also increases the racial wealth gap. This is the high, personal cost of corruption in our real estate market and of our systemic failure to regulate the industry.
The good news is that FinCEN is now considering developing a regulatory regime for residential and commercial real estate. In our comment, CREW calls on FinCEN to take the bold and necessary steps to regulate this industry and prevent kleptocrats, including Putin and his cabal of corrupt actors, from using our neighborhoods to hide their ill-gotten, corrupt, and illegal gains.