DESPITE CONDO BLOWUPS, ‘DARK MONEY’ BILL STILL CRAWLS
Source: The Village Voice
By Emily Nonko
Next month, New York’s mega-priced apartment buyers will get a chance to bid on what’s probably the biggest luxury apartment foreclosure in the city, as a Nigerian energy mogul’s $51 million apartment goes on the block.
As Bloomberg and the New York Post have reported, Kolawole “Kola” Aluko defaulted on a $35 million mortgage. It’s the second giant foreclosure at One57, the 57th Street tower finished in 2014. The building itself was funded partly by a subsidiary of an Abu Dhabi company linked to a global money-laundering investigation.
Aluko’s full-floor apartment was held by a shell company, as are many of New York’s highest-priced condos. The eight-figure properties are held by LLCs with opaque names — until, as in this case, things blow up and the owner’s New York real estate gets entangled with his off-shore legal problems (a Nigerian court has recently ordered Aluko’s assets frozen).
Thanks to permissive laws on shell companies, the United States — and New York in particular — has quietly become one of the world’s money-shielding havens. New York representative Carolyn Maloney has introduced bills to change this five times, according to Quartz.
The latest version, sponsored by Democrat Maloney — whose district covers much of the East Side and 57th Street, including One57 — and Peter King, a Republican, was introduced in the House today. If passed, the bill would mean major changes for the top end of New York’s condo market.
“There are no requirements for anyone involved in real estate, apart from banks, to actually do any anti-money laundering controls or background checks,” says Heather Lowe, the legal counsel and director of government affairs at Global Financial Integrity, a nonprofit that tracks and studies the illicit flow of money around the world. (Right before this interview, Lowe had finished a 17-page testimony she planned to present at today’s congressional testimony.) She called the available real estate in places like Manhattan’s Billionaires’ Row “a simple way to launder a lot of money at once.”
The practice of buyers disguising themselves under LLCs and shell companies, and pouring money of unknown origins into New York real estate, led to an investigation by the New York Times in 2015. At the Time Warner condos over Columbus Circle, the Times uncovered sixteen wealthy foreigners who bought real estate within the tower and were also the subjects of government inquiries ranging from environmental violations to financial fraud.
The federal government has slowly acted on concerns of illicit money flows and nonexistent background checks on billionaire buyers since 2016. That’s when the Treasury Department announced rules requiring title companies to expose the actual buyers on all cash purchases in Manhattan over $3 million. Lowe hesitated to call the move a crackdown; she said it was more like “the feds were testing the water.” So far, according to Lowe, the efforts revealed that 30 percent of owners identified for high-end purchases in both Manhattan and Miami had already been reported by banks over suspicious activity.