Regulation

Need Money Laundered? Try A Real Estate Lawyer

Anti-money laundering activist group Global Witness has recently released a report that indicates that a surprising number of New York real estate lawyers are making a nice little business for themselves advising clients on how to move suspect money into the United States. In fact, the report indicates, they were caught on camera doing it — a lot. 

The Global Witness sting was run by an investigator posing as an African minister of mines who had accumulated millions of dollars from companies that were seeking business in his country. He then sought legal council on whether he should buy a townhouse, yacht or jet.

Twelve of the 13 lawyers that met with investigators posing as potential buyers discussed ways to move money.

Notably, the lawyers are not accused of doing anything illegal, so much as they are accused of making it easy for others to do things that are legally questionable.

“It wasn’t hard to find lawyers to suggest ways to move suspect funds into the United States,” said Stefanie Ostfeld, a spokeswoman for Global Witness. “We went undercover because it is the only way we could show what really happens behind closed doors. The findings speak for themselves — something urgently needs to change.”

The report also noted that the lawyers in question aren’t working at fly-by-night operations helmed by lawyers living down to all the worst stereotypes of their profession. One of the lawyers caught on tape is a recent president of the American Bar Association.

The report further references a New York Times investigation from 2015 that demonstrated a plethora of foreign nationals dropping hundreds of millions of their dollars and their relatives’ dollars into multimillion-dollar properties in Manhattan. The report also quantified the increasing popularity of shell companies in these transactions. 

Federal investigators also seem to be taking an interest — if a belated one. The Treasury Department announced a program that will compel real estate firms to monitor and report shell companies used to buy up high-end properties.

In a rare, bordering on almost impossible to believe, moment of bipartisanship, the House of Representatives is considering legislation to require more transparency into shell companies nationwide.

And if all that boring legal action doesn’t do it for you, on the other side of the pond in the United Kingdom, they are opting for the more medieval method of public shaming. Activists in London will be launching a Kleptocracy Tour, which consists of a bus ride past properties that they said had been associated with illicit money.

They plan to hold a similar tour in New York in April.

The lawyers who were part of the sting were unsurprisingly less than wholly enthused with Global Witness’ methods.

The most interesting reporting in the piece was about James Silkenat, the aforementioned former president of the American Bar Association. Silkenat did directly tell the investigator posing as a client that he would need to know more about the origin of the minster’s money and would have to verify that it was not criminally connected. He also noted that he would report any crimes he found out about to authorities.

So, score one for the good guys on Team No Laundering?

Well, sort of.

Silkenat also told the investigator that there might be “other banking systems that are less rigorous on this than the U.S.” and that “we could provide you with the list of countries where the banking systems require less detail on ownership or source of funds.”

Silkenat told NYT by email that his comment was meant to establish that “we would be a wholly ill-suited choice as legal counsel for any potential client who was looking to violate U.S. or foreign money laundering or other laws.”

Silkenat also noted that an ethics attorney had confirmed that attorneys are not obliged to extensively research clients for first consultations.

Still, other sections of the report indicated some lawyers were much more proactive in making suggestions, including that a smart move to sneak money would be to move it through their lawyers’ bank accounts.

“And you don’t have to declare to bank authorities where the money comes from, because you said you even don’t know who they are?” the investigator asked attorney Gerald Ross, according to the report.

“They’ve asked me, ‘So, you have a lot of money coming in,’” Ross replied, according to the report. “I said, ‘Yes, it’s real estate deals.’ ‘Oh, thank you very much.’”

Ross stated that clients use LLC companies all the time, not because they are hoping to hide assets but because “they’re afraid of being screwed by somebody.”

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