5 ms·

This makes zero sense. If your money's clean enough to get it into an REIT, it's clean enough for anything isn't it?

gammateam 8y ago
No, not necessarily. Just because there is a paper trail doesn't mean there is a criminal consequence. Money laundering is the action of obfuscating the origin. The CRIME of money laundering is the action of obfuscating an ILLICIT origin. So when the prosecuting government can't determine if the origin is illicit, they have no crime. A third state shell company sufficiently severs that link. And the money launderer gets money from the second state sent straight to the first state. So Russian oligarch example: First Country: Has illicit money in Russia. Second Country: Wants to invest in liquid US market to clean money, and use money. Third Country: Creates British Virgin Islands company. BVI company has names on banking and brokerage accounts in any country it wants, with no name of the beneficial owner if this is what is desired. It can invest in capital formation in the US without "Russian Oligarch" appearing on any cap table. BVI company wires money to US venture. New clean money is sent to the BVI company's accounts. BVI company and Russian oligarch now has liquid cash which is usuable and reportable in US, Europe, Russia, wherever. It can be reported for US taxes, it can do whatever it wants. Now back to the third country, why do we not care about the paper trail there? Well the BVI and other countries have no reporting demands. There is no taxing authority in these cases, these countries simply don't fund their public services this way, I know its hard to relate to but its also a great service now that other countries are less competitive. The BVI and other countries may have some form of information sharing agreement, but that comes with conditions too, such as their own standard of due process and probable cause, and there also isn't any information to share. When people use words like "funnel money", there isn't anything sophisticated going on. This is as easy and clear as clicking a button between your checking and savings accounts.
- icebraining 8y ago
  I don't see how your post answers syllogism's question, if anything you seem to agree: "Russian oligarch now has liquid cash". So why is the REIT involved?
  - gammateam 8y ago
    > I don't see how your post answers syllogism's question I see, I had previously only answered WHY it was "clean enough" to get into "any equity investment". Its not clean, it just doesn't matter. The answer to how you perceived the question is the cash flow and scalability. The real estate market is still unbounded, and areas with scarcity have the effect of continuing to drive demand. Other asset classes don't have these perks all in one. You need new money coming out reliably and quickly. REITs are just useful bespoke packages managed by someone else without you needing to figure out that infrastructure.
  - C1sc0cat 8y ago
    Tax and the fact that trusts are better for property investment - I would imagine is why you set up a REIT. Based on my investments in TR Property (TRY) in the UK
bleriot 8y ago
No, at least in the US. The Realtors have lobbied very hard to make sure that the real estate industry doesn’t have the same reporting requirements that banking does. So a lot of dirty money has made it into the US real estate system. The government finally started looking into it a few years ago. “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.”
- stephen_g 8y ago
  I believe that it’s even worse here in Australia. We’re actually on a Transparency International list of countries with insufficient controls because we have basically no reporting for real estate, whereas banks, brokers for financial products etc. do. It’s reportedly very common for people to fly in (mostly from Asia, just given where we are located), choose a property and buy it in cash, and be back out of the country in two days or so. A lot of them don’t even bother renting it out - just hold for a few years empty and then sell it later. The party in power doesn’t seem to care - they have a lot of property themselves (I think the average is 2 per parliamentarian, but one National party MP has 35) so have a vested interest in keeping money flowing in to inflate prices. Being the conservatives, it’s also good for their base - lots of the older/wealthy...

No, not necessarily. Just because there is a paper trail doesn't mean there is a criminal consequence. Money laundering is the action of obfuscating the origin. The CRIME of money laundering is the action of obfuscating an ILLICIT origin. So when the prosecuting government can't determine if the origin is illicit, they have no crime. A third state shell company sufficiently severs that link. And the money launderer gets money from the second state sent straight to the first state. So Russian oligarch example: First Country: Has illicit money in Russia. Second Country: Wants to invest in liquid US market to clean money, and use money. Third Country: Creates British Virgin Islands company. BVI company has names on banking and brokerage accounts in any country it wants, with no name of the beneficial owner if this is what is desired. It can invest in capital formation in the US without "Russian Oligarch" appearing on any cap table. BVI company wires money to US venture. New clean money is sent to the BVI company's accounts. BVI company and Russian oligarch now has liquid cash which is usuable and reportable in US, Europe, Russia, wherever. It can be reported for US taxes, it can do whatever it wants. Now back to the third country, why do we not care about the paper trail there? Well the BVI and other countries have no reporting demands. There is no taxing authority in these cases, these countries simply don't fund their public services this way, I know its hard to relate to but its also a great service now that other countries are less competitive. The BVI and other countries may have some form of information sharing agreement, but that comes with conditions too, such as their own standard of due process and probable cause, and there also isn't any information to share. When people use words like "funnel money", there isn't anything sophisticated going on. This is as easy and clear as clicking a button between your checking and savings accounts.

icebraining 8y ago
I don't see how your post answers syllogism's question, if anything you seem to agree: "Russian oligarch now has liquid cash". So why is the REIT involved?
- gammateam 8y ago
  > I don't see how your post answers syllogism's question I see, I had previously only answered WHY it was "clean enough" to get into "any equity investment". Its not clean, it just doesn't matter. The answer to how you perceived the question is the cash flow and scalability. The real estate market is still unbounded, and areas with scarcity have the effect of continuing to drive demand. Other asset classes don't have these perks all in one. You need new money coming out reliably and quickly. REITs are just useful bespoke packages managed by someone else without you needing to figure out that infrastructure.
- C1sc0cat 8y ago
  Tax and the fact that trusts are better for property investment - I would imagine is why you set up a REIT. Based on my investments in TR Property (TRY) in the UK

bleriot 8y ago

No, at least in the US. The Realtors have lobbied very hard to make sure that the real estate industry doesn’t have the same reporting requirements that banking does. So a lot of dirty money has made it into the US real estate system. The government finally started looking into it a few years ago. “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.”

stephen_g 8y ago
I believe that it’s even worse here in Australia. We’re actually on a Transparency International list of countries with insufficient controls because we have basically no reporting for real estate, whereas banks, brokers for financial products etc. do. It’s reportedly very common for people to fly in (mostly from Asia, just given where we are located), choose a property and buy it in cash, and be back out of the country in two days or so. A lot of them don’t even bother renting it out - just hold for a few years empty and then sell it later. The party in power doesn’t seem to care - they have a lot of property themselves (I think the average is 2 per parliamentarian, but one National party MP has 35) so have a vested interest in keeping money flowing in to inflate prices. Being the conservatives, it’s also good for their base - lots of the older/wealthy...