Divorce & Hidden Money: Searching For Assets Laundered Through Real Estate

A divorcing spouse can hide marital assets by laundering them in a scheme to purchase real estate.

This 26th post in the “Divorce & Hidden Money” series describes one way assets may be laundered through the purchase of real estate.  It supplies the hypothetical situation of “Mark,” a high net worth businessman in the U.S. who hid assets during his divorce.

To hide assets from both his divorcing wife & the IRS, Mark secretly formed a shell company which he used to open an offshore bank account.  Mark hid his beneficial ownership of the shell company & bank account by hiring nominees (i.e.  intermediaries).  Mark employed the nominees as directors of his shell company & they acted as nominee bank signatories on Mark’s offshore bank account.

After Mark opened the offshore bank account, Mark relied on illicit cash couriers, (a.k.a “money mules”), to smuggle the undeclared revenue/cash Mark had accumulated from his business in the U.S.  After the illicit cash couriers smuggled Mark’s cash offshore, Mark deposited it into the offshore bank account he opened in the name of his shell company.  Through his lawyer, Mark then used the cash in this bank account to purchase real estate located in an offshore tax haven.  Mark’s lawyer titled Mark’s newly acquired real estate in the name of Mark’s shell company; and Mark successfully hid his beneficial ownership of the real estate from his wife & the IRS.

A search for assets hidden by a high net worth spouse like Mark, should try to determine whether real estate could have been used as a concealment tool.  When real estate transactions are used to launder or otherwise hide assets, red flags involving lawyers are usually present.  According to pp. 12-13 of a 2013 money laundering report by the Eastern and Southern African Anti-Money Laundering Group¹ these red flags can include the use of: large amounts of cash; intermediaries; money laundering havens; complex structures; business entities and trusts:

“a) Use of large amounts of cash to purchase property involving legal practitioners who do not report STRs [Suspicious Transaction Reports] giving the conclusion that they are either complacent in the money laundering or give a blind eye to circumstances relating to the payment where they could have asked more questions;

b) Distorting information on ownership by using intermediaries and false particulars during purchase of the property through a legal practitioner;

c) Legal practitioners facilitating quick money laundering havens through aborted property transactions where the initial deposited amount has to be paid back or transferred to another account from the legitimate client/trust account of the
lawyer;

d) Instances where legal practitioners have assisted with setting up complex structures to purchase real estate; and

e) Avoiding exposure of the beneficial owner by using the legal practitioner to purchase the property through a company or a trust.”

¹Typologies Report On Money Laundering Through The Real Estate Sector In The ESAAMLG Region Courtesy of: The Eastern and Southern African Anti-Money Laundering Group.

Image: Vycheslav Leskovskiy/Shutterstock.com

By Fred Abrams | Published October 26, 2015 | Posted in Divorce & Child Support, Divorce & Hidden Money, Financial Institutions, Hidden Money, Money Laundering, Tax Fraud, White-Collar Crime Generally | Tagged offshore banking | Comments Off on Divorce & Hidden Money: Searching For Assets Laundered Through Real Estate