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Real Estate Money Laundering

  • Writer: Morgan McBride
    Morgan McBride
  • May 18
  • 6 min read

Similar to the art, jewelry, and other luxury industries, real estate purchases have been used to move and hide illicit funds as a means of “washing” laundered money.



Opaque financing schemes overvalued or undervalued prices, non-transparent companies, trusts, and third parties operating as the legal owners of property work together to camouflage the illicit funds of criminal actors within the economy. Although most illicitly financed properties are houses and buildings, any immovable property, such as vineyards or factories, can also be used in real estate money laundering.


Photo Credit by Corporate Finance Institute
Photo Credit by Corporate Finance Institute

Major cities in the United States, the United Kingdom, Australia, Canada, and Germany have become hotspots for real estate money laundering. These cities have attracted kleptocrats, oligarchs, and criminal actors, as they have become havens for dirty money that can be washed into clean money in the licit economy.


Money laundering via real estate allows criminals to profit through renting out a property they own, renovating a property to resell it, and cashing in on a property’s appreciation over time. Realtors, property developers, brokers, and mortgage advisors, among others, function as gatekeepers in the real estate industry, as they maintain a degree of complicity in the money laundering process.


Real estate money laundering can cause unfair competition in the housing market, market instability, corruption, criminal activity, and artificially distorted property prices.


The Global Financial Integrity organization estimates that over 2.3 billion dollars has been laundered in the United States real estate market during the six years between 2015 and 2021. Such a significant sum highlights a burgeoning illicit industry capable of facilitating a dangerous means of washing dirty money within one sector, affecting nearly every person at some point.


Lakshmi Kumar, the Policy Director of The Global Financial Integrity, asserted that minimal oversight of the real estate industry heightens its money-laundering problem. Although regulations exist in the financing of real estate projects, significant gaps remain throughout the sector, particularly in the components of money laundering that are unique to real estate.



Ihor Kolomoisky

Politically exposed people — those with direct connections to the political elite — have often been intimately involved in real estate money laundering cases throughout the United States. For instance, a Ukrainian oligarch, Ihor Kolomoisky, cultivated a real estate empire in the American Midwest, which allowed him to become Cleveland, Ohio’s most prominent commercial landlord for a period. Kolomoisky and his associates accumulated twenty-two real estate properties between 2006 and 2015.


Photo from the Atlantic Council
Photo from the Atlantic Council

The majority of the shell companies linked to these real estate purchases stem from Delaware, as it is a prime ‘loophole’ offshore haven of financial secrecy. However, over $ 490 million from these transactions was funneled through PrivatBank, a private Ukrainian bank that Kolomoisky co-owned. Most of Kolomoisky’s transactions moved from a Cyprus bank account entitled Pavanti Enterprises to a shell company in the British Virgin Islands before ending up in the hands of a U.S. branch of Deutsche Bank.


The international scope of Kolomoisky’s actions leads to socioeconomic ripple effects in both Ukraine and the United States. According to the International Consortium of Investigative Journalists, Deutsche Bank was involved with Kolomoisky, transferring over 750 million dollars to his American business interests. Thus, the skyscrapers, factories, farming facilities, and other buildings operated as a legitimate haven for Kolomoisky’s laundered money, which went unregulated for over a decade.


Image by Johnny Joo
Image by Johnny Joo

Kolomoisky’s operation in Ohio eroded in 2011 when one of his steel factories exploded, prompting federal safety inspectors to intervene. He ultimately abandoned his buildings due to health and safety violations, resulting in hundreds of employees losing their jobs in Kentucky, Ohio, and New York. The alleged money-laundering scheme grew into an enormous scandal in Ukraine, so the government had to fill a 5.5 billion-dollar hole in PrivatBank’s finances.


Overall, Ihor Kolomoisky’s money-laundering scheme in the real estate industry is a clear example of the issue. Kolomoisky has faced numerous criminal investigations in varying jurisdictions over the last few years. In September 2023, the Bureau of Economic Security of Ukraine and the Prosecutor General’s Office charged him with fraud and money laundering, alleging he laundered $11 million between 2013 and 2020. He has been in pretrial detention in Ukraine since September 2023.



Geographic Targeting Orders

Since 2016, Geographic Targeting Orders have been used as identification and record-keeping requirements for participants in real estate transactions in Manhattan (New York) and Miami-Dade County (Florida). The U.S. Bank Secrecy Act authorizes the fulfillment of Geographic Targeting Orders, as it requires all financial institutions in the United States to establish credible Anti-Money Laundering programs. The original protocols applied only to payments made without financing from a bank or other third party for property purchases totaling over three million dollars in Manhattan and over one million dollars in Miami.


Photo by The National Association of Realtors as of November 2018
Photo by The National Association of Realtors as of November 2018

Over the past few years, GTOs have begun expanding to include new cities nationwide while lowering the bar for purchase costs, which is worth investigating. The Financial Crimes Enforcement Network (FinCEN) announced on October 20th, 2023, that expanding the scope of Geographic Targeting Orders protocols would require U.S. title insurance companies to identify the individuals behind companies that make non-financed residential real estate acquisitions. Beyond the scope of a Geographic Targeting Order, the real estate industry likely needs stronger enforcement and legal measures to prevent illicit financing in the market.


However, reporting a property’s beneficial owners does not sufficiently address the transparency concerns linking the real estate industry to money laundering. Geographic Targeting Orders fail to control the roles of intermediaries, property valuation, and property renovations in money-laundering efforts. Gary Kalman from Transparency International expressed concern that anonymous purchases of luxury real estate artificially shift the housing market away from affordable and moderately priced housing toward highly expensive markets. Thus, real estate money laundering directly hampers the lives of a nation’s ordinary citizens by worsening the socioeconomic landscape.


The Risks of Real Estate Money Laundering

The precarious nature of real estate money laundering encompasses three primary types of risk: customer-, transaction-, and geography-based risks. Where customers are concerned, monitoring mechansims that identify the property owner’s true identity, alongside the involvement of any third parties, allows for politically exposed persons or notably corrupt individuals to be identified within the transaction. The number of transactions, under- or over-valuation concerns, origins of the funds, and types of properties, amongst other factors, allude to the transaction risks of real estate purchases. This type of risk gets investigated to understand the potential routing of illicit funds into the legal economy via real estate aquisitions. Lastly, geographical risks span the breadth of understanding a property’s location and geographical origin, and its owners to understand whether the transaction qualifies as a standard business action.


The spectrum of prospective risks inherently connected to real estate money laundering schemes aims to spotlight any potential blind spots in the legal economy when investigated adequately during the early stages of property acquisitions. Thus, the real estate industry needs sophisticated compliane and anti-money laundering programs for residential and commercial property purchases to mitigate the plethora of risks.


The Need for Enhanced Cooperation on a Global Scale

Furthermore, due to the international scope of money laundering, enhanced regulations for the real estate industry are needed globally. Countries must collaborate to protect their cities while blocking their citizens from participating in real estate money laundering abroad. Real estate money laundering reform requires a multi-pronged approach that adequately addresses numerous aspects of the industry’s illicit behavior.


A valuable start domestically for the United States involves a full expansion of the Geographic Targeting Orders program to include every city and county in the nation under its scope. As of March 10, 2026, the Treasury Department expanded the scope of GTOs to include the southwest border of the United States, with the intention of combatting illicit activities crossing over the southern border spanning from Arizona to Texas. However, the GTOs would additionally need to integrate non-cash transactions into its scope, as the presently limited scope allows criminal actors to exploit the unregulated cities, as Ihor Kolomoisky did.


Since Kolomoisky’s shell companies existed in Delaware, his illicit foreign funding camoflaged so that he could obtain an American steel factory in South Lyon, Michigan. An intensive shell game occurred with Kolomoisky’s money to disguise the origins of his funds through numerous shell companies in a few offshore havens.


Beyond Geographic Targeting Orders, one could argue that compliance protocols specific to the real estate industry are necessary to prevent future real estate money laundering scandals. Existing real estate compliance mechansisms vary based on regions and jurisdictions, so no real estate compliance standard exists nationwide or on a global scale. Amidst the potential complications, on a local and national level, a more unified approach across all fifty states would help address the critical void in the United States’ real estate anti-money laundering compliance programs.



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