## Hidden Fortunes

## Source details

**Canonical URL:** [Hidden Fortunes](https://www.imf.org/en/publications/fandd/issues/2024/12/hidden-fortunes-chady-el-khoury)

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## Bibliographic details
- Authors: CHADY EL KHOURY
- Published: December 3, 2024

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### Overview
- Author: CHADY EL KHOURY, assistant general counsel in the IMF’s Legal Department.
- Publication: F&D Magazine, December 2024.
- Central claim: Criminal networks, corrupt politicians, and tax evaders use global real estate to park illicit wealth, contributing to housing bubbles and pricing out local buyers.

### How dirty money distorts real estate markets
- Illicit purchasers buy luxury properties through shell companies, trusts, and offshore accounts established by professional enablers rather than purchasing directly.
- Developers rarely question the source of funds, producing high-end properties often left empty and owned by anonymous entities.
- Resulting effects include inflated property prices and housing bubbles that make homeownership less attainable for ordinary residents.

### Mechanisms and actors
- Use of anonymity tools:
  - Shell companies.
  - Trusts.
  - Offshore accounts.
  - Professional enablers who set up opaque ownership structures.
- Real estate sector practices:
  - Developers and market participants often do not verify the ultimate source of funds.
  - Real estate functions as a safe haven for concealing illicit fortunes.

### Geographic scope and examples
- Major global cities cited where effects are pronounced: New York, Miami, London, Dubai.
- London example:
  - Foreign companies held £73 billion worth of properties in 2018.
  - About 90 percent of these purchases were made by entities registered in tax havens.
  - Source for the London figures: a paper by economists Jeanne Bomare and Ségal Le Guern Herry (as reported in the article).
- African cities also affected:
  - Lagos, Nairobi, Johannesburg experience speculative investments that create similar real estate bubbles.
  - Weak regulations and informal housing markets in these regions attract questionable money and squeeze out local buyers.

### Regulatory background and gaps
- Two decades ago, the international community recommended that real estate agents conduct due diligence and report suspicious transactions, similar to banks.
- Unlike banks, real estate sector actors are not held to consistently strict anti-money-laundering standards.
- Detection and enforcement remain weak globally, allowing continued use of real estate for money laundering.

### Policy recommendations
- 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.
- Where privacy laws permit, consider making beneficial ownership information public to enhance transparency.
- Strengthen detection and enforcement mechanisms in the real estate sector to close existing loopholes.

### Key statistics and facts (verbatim)
- £73 billion (value of properties held by foreign companies in London in 2018).
- 90 percent (share of those purchases made by entities registered in tax havens).
- Two decades ago (timeframe when due diligence recommendations for real estate agents were prescribed).
- Cities explicitly named: New York, Miami, London, Dubai, Lagos, Nairobi, Johannesburg.

*Source: Hidden Fortunes, F&D Magazine, CHADY EL KHOURY, December 2024.*

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_Source: https://www.imf.org/en/publications/fandd/issues/2024/12/hidden-fortunes-chady-el-khoury_