Proposed bill targets money-laundered, terror-funded skyscrapers, LLCs
The iconic skyscraper at 650 Fifth Ave. towers above the edge of Rockefeller Center like a giant middle finger to US victims of terrorism.
Built in 1978 by Iran, it has been a stark and shameful reminder that the US government has consistently failed to prevent criminals, and even terror-supporting nations, from profiting off property in America.
Eighteen years ago, the Patriot Act mandated new anti-money-laundering regulations and ordered them overseen by the Treasury Department. But Treasury “temporarily exempted’’ real estate at the time — and that directive has yet to be lifted.
“It sends the message that crime does pay,” said Louise Shelley, author of “Dark Commerce: How a New Illicit Economy Is Threatening Our Future.”
At the heart of the problem are LLCs, or limited liability companies, which can be set up in the United States to buy and manage real estate anonymously, critics say. The cloaked entities allow celebrities to purchase properties out of the public eye, criminals to buy real estate with stolen cash — and terrorists to fund their deadly operations right under our noses, they say.
US Rep. Carolyn Maloney (D-NY) said she hopes to introduce a bipartisan bill “early this Congress” that would finally force every LLC to fully reveal its owners.
“Law enforcement has been asking for years for new laws so that they can follow the money and not be stymied in their investigation by anonymous shell companies,’’ she said. “The US should not be a safe haven for money-laundering and criminals’ funds.”
It’s easy to see how the 36-story high-rise at 650 Fifth became the poster child for a broken system. The site, at the corner of 52nd Street, was built by the last Shah of Iran the year before he was overthrown — and then transferred to entities that are simply fronts today for the terror-supporting Mideast nation, the feds say.
Over the years, Iran has allegedly raked in tens of millions of dollars behind the scenes in rental fees from such high-profile — and sometimes controversial — tenants as the late Ivan Boesky, who was convicted of insider trading in 1987, and the late Marc Rich, a commodities trader and tax fugitive who sold Iranian oil to Israel despite sanctions. But federal authorities were able to tie the Iranian government to the prime piece of real estate only after years of investigating. They finally took the owners to court in 2008, but a jury wouldn’t rule in the US government’s favor until almost a decade later.
During the wait for justice, the building seemed to thumb its nose at victims of Iranian-sponsored terrorism by its mere presence.
By 2016, no one was more frustrated by the situation than Jennifer Shasky Calvery, then head of Treasury’s Financial Crimes Enforcement Network, or FinCEN, sources say.
Treasury still hadn’t followed through on the mandated anti-money-laundering regulations, possibly at least partly because the country’s powerful real-estate lobby was against them, knowledgeable sources said.
So Calvery issued her agency’s first “geographic targeting order.” The GTO covered New York and Miami and forced title insurance companies to begin reporting the names of any incoming LLC owners who were buying properties in the areas above a certain financial threshold.
For Manhattan, the threshold was $3 million. In Miami, it was $1 million. The order was not retroactive. The information also was not made public, but at least authorities had access to it.
There are now currently GTOs in 12 cities, including LA, San Francisco, Seattle, Dallas, Honolulu and Chicago. The financial reporting threshold also has been lowered to $300,000 everywhere, substantially widening the measure’s scope.
Calvery, who now works at HSBC, declined to comment.
Critics say the program doesn’t go far enough.
GTOs need to expand to every section of the US, from Aspen, Colo., to the Hamptons on Long Island, where big money from suspicious sources has been known to park itself, they say. Otherwise, like a high-stakes game of Whac-A-Mole, money launderers will just move from covered areas to uncovered ones. There also should be no money limit on real-estate purchases in GTO areas, and the rules need to address the role that real-estate brokers play in the process, critics say.
“Treasury needs to issue regulations requiring real-estate agents, not just title companies, to know their customers, screen suspect funds and report suspicious activity to law enforcement,” said Elise Bean, a former staff director of the Senate Permanent Subcommittee on Investigations.
Bean said that in the long run, GTOs are not the answer. They “are a poor substitute for the nationwide regulations Treasury is required to issue,’’ she said. “They aren’t designed well, aren’t permanent, were never subjected to public comment and are riddled with money-laundering loopholes and vulnerabilities.”
The statistics only underscore the need for more action, experts say.
By 2017, 30 percent of cash purchases of high-end real estate by LLCs in New York, Miami, LA, San Francisco, San Diego and San Antonio were involving suspicious buyers, according to FinCEN.
Entities intent on keeping a low profile love buying with cash because, unlike trying to get a mortgage through a bank to purchase property, no one typically asks questions about where their money comes from, industry experts note. LLCs help further because of the anonymity.
Russian oligarchs also have scored plenty of prime city property through LLCs, including Oleg Deripaska, who scooped up a $40 million Upper East Side mansion.
Several of his companies were slapped with US sanctions by the Treasury Department last year, although the Trump administration recently announced it had reached a deal to lift the measures.
Jho Low, the Malaysian accused fraudster and fugitive at the center of a global scandal, also bought multiple city properties through anonymous LLCs.
Two years ago, after a lengthy battle in the courts, the feds finally scored in their battle to seize 650 Fifth Ave. It took a Manhattan jury just a day to decide that the majority owner, the Alavi Foundation, had engaged in money laundering to benefit Iran. The ruling would pave the way for what US authorities crowed would be the largest terror-tied civil forfeiture in history.
Alavi, which bills itself as a do-good nonprofit, denied the allegation and is still in the process of appealing the verdict.
Fiona Havlish, who lost her husband on 9/11 in the south tower of the World Trade Center, says she is confident that justice ultimately will be served.
“Every time I walk by that building, I just look at it and I think about how very grateful I am to our courts and our government for even figuring it out,’’ she said, referring to the Iranian government’s alleged ties to the site.
“My goal was always truth and accountability, and they can take a lot of time and require a lot of patience. It just does.”
If Maloney’s legislation is introduced, all 50 states would be required to report the ownership information for all of the companies they incorporate — and the data would need to be updated on at least an annual basis.
As a source noted, “That would have been the key to identifying the owners of the New York LLC that owned 650 Fifth.”