Fifteen years ago, a 23,000 square foot mansion in Washington D.C.’s swanky Embassy Row was bought for $15 million in cash. The purchase was made through a Delaware-registered shell company, a corporation that existed on paper, but had no real physical presence. Buying the mansion through a company kept the identity of the ultimate owner out of public records, with even those selling the estate remaining in the dark as to who they were. It was only a decade later that reporting by the Washington Post revealed that the true owner of the property was Russian oligarch Oleg Deripaska, a close ally of Vladimir Putin. Deripaska, who was once the richest person in Russia, also picked up $47 million worth of property in Manhattan through companies he controlled. He was subsequently slapped with sanctions by the U.S. Treasury in 2018 due to Russia’s ongoing instigation of violence in Eastern Ukraine.
It isn’t just Russian oligarchs who have shown an interest in luxury U.S. real estate. In 2011, a Manhattan penthouse once owned by Jay-Z and Beyoncé was bought for just over $30 million. Again, the purchase was made through a shell company, obscuring the fact that the true owner was Jho Low, a Malaysian national who was later found to have stolen around $4.5 billion from the 1MDB, the country’s sovereign wealth fund. The penthouse purchase was just one of many high-value properties across the U.S. that Low accumulated during the 2010s before his theft of Malaysian public funds was exposed and he became an international fugitive.
Stories like these have become all too common in recent years as real estate markets in countries like the U.S. and the U.K. have become prime destinations for illicit wealth. Real estate is an attractive investment for money launderers: It offers a safe return, the uncertainty around its true market value makes it useful for hiding illicit proceeds, and in many countries the sector is often subject to few, if any, anti-money laundering provisions. However, because of the secrecy shrouding this behavior, it is hard to know how much illicit money makes its way into real estate. In a recent study of known money laundering cases in the U.S., the think tank Global Financial Integrity found that $2.3 billion was laundered through U.S. real estate between 2015-2020, which is likely a significant underestimate of the problem.
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