RISMEDIA, April 25, 2007-Although real estate agent Jim Dreis's cleverly written book The Traders is fiction, using real estate purchases to launder money is not.
Flipping is the key phrase and here is how it's done. Criminals arrange to "sell" a piece of property to a foreign investor who is, in reality themselves, working through one of several offshore companies. The "sale" price is suitably inflated above the acquisition cost, and the money is repatriated in the form of a capital gain on a real estate "deal."
According to Bankrate.com, "When you sell your primary residence, you can make up to $250,000 in profit if you're a single owner, twice that if you're married, and not owe any capital gains taxes."
Similar local property money-laundering deals occur where criminals will purchase a piece of property, paying below the real market value on the paperwork. The rest of the purchase price is paid in cash under-the-table. The property is then resold for the full market value and the money recouped, with the illegal component now appearing to be capital gains.
An increasingly common method involves placing a deposit on a house purchase and then pulling out of the deal after a few days. Although it usually involves the solicitor (lawyer) deducting a 5% commission on a failed deal, the criminals then get a legitimate check from the solicitor's office.
According to James Petras, professor of sociology, State University of New York at Binghamton, "There is a consensus among U.S. congressional investigators, former bankers and international banking experts that U.S. and European banks launder between $500 billion and $1 trillion of dirty money each year, half of which is laundered by U.S. banks alone. As Sen. Carl Levin summarizes: "Estimates are that $500 billion to $1 trillion in criminal international proceeds are moved internationally and deposited into bank accounts annually. It is estimated that half of that money comes to the United States"
The top money laundering schemes are as follows:
• Real Estate Transactions
• Use of Haven Bank Credit Cards
• Receiving Consulting or Directors Fees
• Arranging Corporate Loans
• Proceeds of Gambling
• Using Stock Purchases
• Use of Businesses
• International Importing and Exporting
• Use of Free Trade Zones
• Virtual Money Laundering Through the Internet
In The Traders, Dreis tells the story of a real estate trader who joins a drug lord targeting property owned by senior citizens. The Traders is about an unethical real estate exchanger, Ivan Schmidt, who wants to accumulate wealth through solving a drug lord's problem-getting drug money quietly across the border. To achieve that, he will use the cash from sales to acquire real estate owned by senior citizens living in the Southwest and then trade that property for real estate outside the country.
Sprinkled throughout the story is a realistic portrayal of why people think and operate the way they do, plus an occasional bit of humor. However, in the end as we all know, it's the reality that each person is responsible for deeds done-either vindicating or condemning that "occupation." Also addressed in the story is the United States' policy toward drugs, medical care and the plight of illegal immigrants. The overall purpose of the book is to entertain, while at the same time provoking readers to think about what might happen if we allow greed to grow and fester unfettered.
Author Jim Dreis, a licensed real estate agent in the state of Arizona since 1984 and a real estate broker since 1990, is a former president of the Tucson Real Estate Exchangors and a member of the Arizona Association of Real Estate Exchangors.
To get your copy of The Trader, visit www.RealEstateBooks.org.