## Hidden Fortunes

## Source details

**Canonical URL:** [Hidden Fortunes](https://www.imf.org/-/media/files/publications/fandd/article/2024/12/el-khoury.pdf)

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### Overview
- Thesis: Criminal networks, corrupt politicians, and tax evaders use global real estate as a safe place to park illicit wealth, contributing to housing bubbles and pushing local buyers out of markets.
- Core mechanism described: use of shell companies, trusts, and offshore accounts established by professional enablers to hide ownership of high-value properties (example: instead of buying a $10 million penthouse directly, illicit buyers use anonymizing structures).

### Mechanisms and market effects
- Use of anonymous entities leads to high-end empty properties concentrated in major global cities.
- Developers rarely question the source of funds, facilitating inflows of questionable money.
- Resulting distortions:
  - Inflation of property prices in cities such as New York, Miami, London, and Dubai.
  - Creation of housing bubbles that exclude local buyers.
  - Similar speculative pressures in African cities, including Lagos, Nairobi, and Johannesburg, amplified by weak regulations and informal housing markets.

### Empirical example
- London: foreign companies held £73 billion worth of properties in 2018, with about 90 percent of these purchases made by entities registered in tax havens (from a paper by Jeanne Bomare and Ségal Le Guern Herry).

### Regulatory gaps and enforcement
- Two decades ago, international guidance recommended that real estate agents, like banks, conduct due diligence and report suspicious transactions.
- Unlike banks, real estate professionals are not consistently held to strict anti-money-laundering standards.
- Detection and enforcement remain weak globally, allowing real estate to continue functioning as a safe haven for illicit wealth.

### Policy recommendations and transparency measures
- Require property buyers to disclose their true identity—the “beneficial owner.”
- Public agencies should verify ownership information and make it accessible to authorities investigating suspicious transactions when red flags arise.
- If privacy laws allow, make beneficial ownership information public to enhance transparency.
- Strengthen anti–money-laundering standards and enforcement for the real estate sector to reduce its attractiveness for concealing illicit fortunes.

### Consequences if unaddressed
- Continued distortion of housing markets.
- Further widening of affordability gaps and making homeownership more distant for ordinary people.

*Chady El Khoury is a deputy division chief in the IMF’s Legal Department.*

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_Source: https://www.imf.org/-/media/files/publications/fandd/article/2024/12/el-khoury.pdf_