Banks should be on alert for Russian oligarchs attempting to circumvent U.S. sanctions by investing in commercial real estate, a U.S. Treasury Department watchdog said.
Wealthy Russians with ties to the Kremlin are likely attempting to evade the economic sanctions placed on them in the U.S. by moving money into the commercial-real-estate sector, where complex financing methods and opaque ownership structures can help bad actors hide funds, the Treasury’s Financial Crimes Enforcement Network, better known as FinCEN, said Wednesday.
FinCEN, which serves dual roles as the U.S.’s financial intelligence unit and anti-money-laundering regulator, is the recipient of the suspicious activity reports that financial institutions are required to file if they suspect a transaction may be illicit in nature. Law-enforcement officials can consult the reports when conducting investigations into financial crimes.
The Biden administration has targeted wealthy Russians as part of its response to President
invasion of Ukraine last year, placing those with close ties to the Russian government on blacklists that are intended to prevent them from accessing the U.S. financial system.
The alert issued by FinCEN on Wednesday is the Treasury’s latest effort to prevent sanctioned Russians from finding ways to evade such financial restrictions. In an 11-page report, FinCEN listed a number of potential red flags and typologies it said banks should be on the lookout for.
“Thanks to international pressure and the economic restrictions that more than 30 countries have imposed on Russia for its brutal war against Ukraine, sanctioned Russian elites are increasingly left with fewer options for moving and hiding their ill-gotten wealth,” FinCEN Acting Director
Sanctioned individuals may try to use pooled investment vehicles or offshore funds to avoid due-diligence processes, FinCEN said in its alert. Banks aren’t typically required to verify the identities of individuals who own less than 25% of a fund. Sanctioned individuals could keep lowering their stakes to avoid detection, while still maintaining control of the fund, FinCEN said.
Oligarchs also may use shell companies and multiple layers of legal entities or trusts, or transfer their assets to a family member or business associate to conceal their ownership, the Treasury bureau added.
Sanctioned individuals aren’t just investing in high-end or luxury properties, according to the alert. In some cases, they may seek out more inconspicuous investments that provide stable returns without drawing unwanted attention. Such sanction evasion strategies are just as likely to occur in small to midsize U.S. cities as they are in the largest metropolitan areas, FinCEN said.
FinCEN’s latest alert builds on a similar warning issued last year, in which the watchdog advised banks to pay close attention to transactions involving high-value assets such as artwork, luxury yachts and jewelry.
Federal prosecutors have warned that lawyers, consultants and other service providers who work for sanctioned individuals could run afoul of the law.
An indictment unsealed earlier this week charged a former high-level FBI agent and a former Russian diplomat with sanctions violations in connection with work they did for
a raw-materials magnate who was placed on a sanctions blacklist in 2018.
Write to Dylan Tokar at firstname.lastname@example.org
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By Robb M. Stewart
Canada is paving the way to become a launching pad for commercial space flights, with plans by Ottawa to establish regulations aimed at supporting launches by private entities.
The move promises to better position Canada to tap into increase in money that has poured into the space sector in recent years, as a number of countries have increased their level of space activity to join or take on industry titans like the U.S.
The federal government said Friday that while Canada is well positioned to support space launches, the regulatory framework needs to be modernized and a number of measures are planned to support commercial launch activities.
In the interim, the government said it plans to allow commercial space launches in Canada under existing legislation and regulations, on a case-by-case basis. During this period, which is expected to last three years, Transport Canada intends to work with other federal departments and agencies to develop regulatory requirements, safety standards and licensing conditions needed for commercial space launches in the country.
The government said the transportation department also will establish an interdepartmental review process to ensure any launch is considered and approved in a way consistent with domestic legislation, international treaties, and national security and foreign policy interests.
“A long-term Canadian commercial space launch regulatory framework is key to maintaining Canada’s leading role in outer space exploration and development and represents an important evolution in Canada’s space activities,” said Annie Koutrakis, parliamentary secretary to the minister of transport. “Canadian space launch capability will create lasting economic opportunity for the Canadian space sector, encourage innovation and research, and support national security.”
Since the early 1980s, nine Canadian Space Agency astronauts have flown to space 17 times. The government said that in 2020, the Canadian aerospace industry contributed more than $16 billion and close to 207,000 jobs to the country’s economy.
In a report released Friday, McKinsey & Co. said the space sector has experienced massive growth in investment, with public and private markets globally injecting $10 billion in fresh capital into space companies in 2021, compared with $300 million a decade earlier. And while the U.S. remains in the lead for funding, with a civil space budget that represents more than 40% of the worldwide total, many countries are raising their level of space activity and about 70 have established national space agencies, the consulting firm said.
A first attempt to launch satellites from British soil reached space earlier this month, though fell short of reaching its target orbit. In November, India tested its first privately developed rocket with a suborbital launch that was a step forward in its efforts to develop a commercial space industry.
Maritime Launch Services Inc., which is developing a launch site in the eastern province of Nova Scotia that will provide satellite delivery services to clients, welcomed Canada’s support for commercial launch activities.
“With today’s announcement, the global space industry can be confident that commercial launch in Canada is not only here, but it has this government’s support,” Maritime Launch Chief Executive Stephen Matier said.
Write to Robb M. Stewart at email@example.com
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WASHINGTON — The drawn-out saga of Title 42, the set of emergency powers that allows border officials to quickly turn away migrants, has been chaotic at the U.S.-Mexico border. In Washington, it hasn’t unfolded much better.
The Supreme Court is weighing whether to keep the powers in place following months of legal battles brought on by Republican-led states after President Joe Biden’s administration moved to end the Trump-era policy, which was set to lapse this week until the court agreed to take it up.
The administration has yet to lay out any systemic changes to manage an expected surge of migrants if the restrictions end. And a bipartisan immigration bill in Congress has been buried just as Republicans are set to take control of the House.
In short, America is right back where it has been. A divided nation is unable to agree on what a longer-term fix to the immigration system should look like. Basic questions — for example, should more immigrants be allowed in, or fewer? — are unanswered. Meantime the asylum system continues to strain under increasing numbers of migrants.
The Biden administration has been reluctant to take hardline measures that would resemble those of his predecessor. That’s resulted in a barrage of criticism from Republicans who are using Title 42 to hammer the president as ineffective on border security. The rules were introduced as an emergency health measure to prevent the spread of COVID-19.
“The Democrats have lost the messaging war on this,” said Charles Foster, a longtime immigration attorney in Texas who served as an immigration policy adviser to Republican George W. Bush but now considers himself independent. “The tragedy is, Democrats more than anyone should focus on this issue, because unless and until it can be fixed, and the perception changes, we’ll get nothing ever through Congress.”
Anyone who comes to the U.S. has the right to ask for asylum, but laws are narrow on who actually gets it. Under Biden, migrants arriving at the border are often let into the country and allowed to work while their cases progress. That process takes years because of a 2-million-case backlog in the immigration court system that was exacerbated by Trump-era rules.
Title 42 allows border officials to deny people the right to seek asylum, and they have done so 2.5 million times since March 2020. The emergency health authority has been applied disproportionately to those from countries that Mexico agreed to take back: Guatemala, Honduras, El Salvador and more recently Venezuela, in addition to Mexico.
“There is not going to be a good moment, politically speaking,” to end the restrictions, said Jorge Loweree of the American Immigration Council. The administration should have been preparing all along to create a better system for asylum seekers,” Loweree said.
“It has allowed the other side to weaponize this issue. And the longer it remains in place, the longer the weapon will remain effective.”
The authority was first invoked at the height of the COVID-19 pandemic by President Donald Trump, whose immigration policies were aimed at keeping out as many migrants as possible. He also drastically reduced the number of refugees allowed into the country, added restrictions to the asylum process that clogged the system and kept migrants in detention, and reduced legal immigration pathways.
Biden has been working to expand legal immigration and has undone some of the most restrictive Trump policies. But the administration kept the policy in place until this spring, and even expanded its use after announcing it would end.
Republican say there will be even more chaos if it’s lifted. But even with Title 42 in place, border officials have been encountering more migrants than ever before. In the budget year that ended Sept. 30, migrants were stopped 2.38 million times, up 37% from 1.73 million times the year before.
“I don’t know why it’s taking them so long to get serious about deterrence,” Republican Sen. Shelley Moore Capito of West Virginia said of the Biden administration. Capito is an incoming member of the Senate Republican leadership and the top GOP senator on the committee that oversees money for Homeland Security, the federal agency that manages border security.
Border officials have braced for an expected increase, and migrants who have arrived are unsure of how asylum processes will work when the policy ends. Homeland Security officials have reported faster processing for migrants in custody on the border, more temporary detention tents, staffing increases and more criminal prosecutions of smugglers.
They say progress has been made on a plan announced in April but large-scale changes are needed. Meanwhile, the Senate’s Republican leadership killed a bipartisan immigration bill that would have addressed some of these issues.
The split isn’t just inside Congress. One in 3 U.S. adults believes an effort is underway to replace native-born Americans with immigrants for electoral gains, according to an AP-NORC survey.
Biden and his aides have said they are working to divert migrants coming out of Central America and helping provide aid to poorer nations that are bleeding people headed for the U.S. But the president is limited without action from Congress.
White House press secretary Karine Jean-Pierre said the administration is surging assistance to the border and will continue to do so. But “the removal of Title 42 does not mean the border is open,” she said. “Anyone who suggests otherwise is simply doing the work of these smugglers who again are spreading misinformation, which is very dangerous.”
A year-long appropriations bill passed the Senate on Thursday that would give the Border Patrol 17% more money, as well as 13% more for the Justice Department to develop an electronic case management system for immigration courts.
But Citizenship and Immigration Services, central in the asylum process, only got one third of what Biden had proposed to speed up the system.
Democrats, for their part, say they want policies that reflect America’s reputation as a haven for those fleeing persecution. But they can’t agree on what that looks like.
Sen. Dick Durbin, D-Ill., has been working on the issue for 20 years. This week, he stood on the Senate floor, sounding dejected as he talked about how Congress couldn’t push through reform.
“It is a humanitarian and security nightmare that is only getting worse,” he said. “We’re being flooded at the border by people who want to be in the United States, safely in the United States.”
Why, he asked, can’t Washington figure out a better way?
After China’s most economically and politically turbulent year in more than three decades, investors are keen to see how 2023 will unfold for the world’s second largest economy.
The country is experiencing an explosion of COVID infections, after authorities earlier this month suddenly dropped most of the notoriously draconian restrictions that have shackled business activity and daily life through much of the pandemic.
But so far, experts’ predictions of widespread deaths and a nationwide overwhelming of hospitals have yet to materialize. More than 90% of Chinese are fully vaccinated, compared with 68% of Americans, according to the countries’ respective health authorities.
Officials have said publicly that they now deem the virus weak enough to weather a surge of infections as rapidly as possible — with the hope of then reviving the country’s economic doldrums.
The following are the stories to watch over the coming year as we gauge just how successful — or unsuccessful — this approach becomes.
Loosening of internal COVID restrictions surprised citizens with its suddenness. Meanwhile, China is moving more slowly — but steadily — toward reopening to foreign travelers and businesspeople. Next month, it will abolish a centralized quarantine for arrivals, and require only three days of isolation at home or in a hotel, Chinese media reported Wednesday.
Hong Kong last week scrapped all quarantine requirements for international arrivals.
But don’t expect the prepandemic wave of outbound Chinese travelers to resume quickly. More than half of respondents to a survey of 4,000 Chinese consumers by consultancy Oliver Wyman said they would not travel abroad for several months, if not more than a year.
For much of the pandemic, unlike many developed countries, China refrained from large-scale stimulus measures, mostly rolling out supply-side support such as boosting infrastructure projects. This neglect of stimulating domestic consumption was compounded by citizens’ reluctance to spend amid times of uncertainty.
But that appears to be changing. At China’s annual economic summit last week — chaired by Xi Jinping, given a norm-busting third presidential term this autumn — officials declared that “the recovery and expansion of consumption should be given top priority,” according to an official readout. Measures include boosting incomes as well as providing subsidies and incentives in a range of categories such as alternative-energy vehicles, housing renovations and elder services.
“Consumer demand is now quickly moving up Beijing’s policy agenda,” consultancy Trivium wrote Tuesday in response to the announcements.
China’s beleaguered property sector — which last year was on the verge of collapse — has been receiving steadily rising government support. Xi last month said that a raft of new measures would be forthcoming, including requiring lenders to up their loans to developers as well as support for bond issuances by private real-estate firms.
Banks have also slashed average mortgage rates by more than a percentage point in the last several months, and mortgage requirements have eased, while processing times have shortened.
“This pragmatic course correction should lead to a gradual, steady recovery in new-home sales in the second half of 2023,” Matthews Asia investment strategist Andy Rothman said in an emailed statement.
Trivium analysts concurred. “We expect more policies in the new year to restore demand for new housing and to boost construction,” they wrote.
These revitalization moves, if successful, bode well for the beginning of a Chinese recovery next year, analysts said.
Through COVID relaxations and proactive fiscal measures, consumer mobility and rising sentiment will help reinvigorate China’s growth in the second quarter and foster expansion even further in the year’s second half, said Bruce Pang, chief economist for Greater China at Jones Lang LaSalle.
Pang expects China’s economy to grow more than 5% in 2023, a forecast other analysts are revising their own estimates toward. “And don’t forget, China is likely the only major economy with a serious [monetary] policy easing stance, while much of the world is tightening,” he said.
The recently departed chief executive of the UK’s competition watchdog has been told he is not allowed to lobby the regulator or government for two years as he takes on a role with US consultancy Keystone Strategy.
Dr Andrea Coscelli left the Competition and Markets Authority’s top job in July, and will now co-head Keystone’s European operations and spearhead new London and Brussels offices.
According to a letter published by the government’s Advisory Committee on Business Appointments, which rules on applications for top civil servants looking to take on outside work, Coscelli will face a number of restrictions to “mitigate the risk he may be seen to offer Keystone and its clients any unfair access and influence on regulatory matters”.
These include not advising Keystone on any work that went on during his time as CMA chief, or lobbying regulators in a personal capacity for two years.
The “significant knowledge of privileged material” Coscelli gained while probing mergers and cartels for the watchdog means he cannot take on the Keystone role until January.
The Coscelli letter was first reported by The Times. The CMA and Keystone Strategy have been approached for comment.
Acoba’s advice comes at a key time for the City’s relationship with its competition watchdog. A wide-ranging probe into potential anti-competitive practices across financial services continues to drag on, having been extended on multiple occasions.
With the next update expected in the Spring after more evidence gathering recently, some experts are predicting that the CMA’s findings could be harsher than initially expected.
The CMA will also play a part in overseeing how open banking technology is rolled out and regulated as part of a new committee of regulators.
A National Audit Office report published in May found that while the CMA’s responsibilities had significantly increased in the wake of Brexit, “recruiting the right specialist skills” remained a challenge, with around a quarter of legal services and economics posts remaining vacant.
Former senior CMA staff have ended up taking roles in the private sector after their departures. Former chair Lord Andrew Tyrie joined law firm DLA Piper as a political consultant, after departing in the wake of disagreements with Coscelli among others on the board.
Coscelli’s departure coincided with a period of wider uncertainty at the top of the competition watchdog. Tyrie’s early departure left an interim chair in charge. After a lengthy appointment race, former Boston Consulting Group senior partner Marcus Bokkerink was appointed to the role some two years later.
Coscelli’s chief executive post is also being filled on an interim basis. Coscelli announced his planned departure to colleagues in June 2021, Sky Newsreported.
To contact the author of this story with feedback or news, email Justin Cash
Homeownership became out of reach for millions of Americans following the recent boom in home prices. Lower-income families have been hit especially hard, with the share of new homes selling for under $300,000 plummeting to 10% from 35% in just two years.
A number of factors, including more than a decade of limited homebuilding, a sudden and sharp rise in demand related to demographics, seriously low mortgage interest rates, and lifestyle changes, and surging homebuilding costs caused by pandemic disruptions are all partly to blame.
There are also four key structural issues related to land, labor, regulation, and NIMBYism that make it increasingly difficult to get entry-level homes built today, exacerbating the issue of affordability.
Land prices are up
Land is a finite resource. Over time, the availability of land in desirable areas goes down, which pushes prices up. This is critical as land makes up between 20% and 30% of home prices in more affordable and development-friendly markets and 40% to 50% in land-constrained and coastal markets.
Over the past two years, land prices have spiked in response to increased demand. For-sale homebuilders that were rushing to secure land were competing with other buyers also in hurry.
In response, builders expanded their search radius to less-central locations, but it is not a surefire plan for creating housing at more affordable prices. Not only have those plots gone up in price, but in some cases, the land lacks entitlements (the legal approval needed for development) and/or infrastructure (water, sewers, roads and the like), both of which are time-consuming and expensive to add.
Land prices can adjust down during a protracted housing market correction or recession. The finite nature of the resource, though, means pricing will remain a hurdle when trying to build lower-priced homes in the future.
Labor is scarce
There were over a million residential construction workers during the mid-2000s housing boom. Total employment dropped to just 550,000 in 2011 during the housing bust as the industry struggled with weak demand and limited job opportunities. Many skilled workers left the housing industry permanently as they reskilled and found jobs in other industries perceived to be more stable.
Employment in residential construction has gradually improved to today’s roughly 900,000, but 62% of homebuilders report that they are still facing a labor shortage, per Zonda data. Retirements and alternative employment opportunities at places like Amazon also play a role.
Skilled workers within the construction industry have enjoyed a decade of rising wages, with June earnings up 5.6% compared to last year. Higher wages are good for employees but also contribute to higher homebuilding costs. Less labor-intensive building options exist, like 3D printing of homes, modular construction and other alternative building methods, but none have reached sufficient scale in the marketplace.
Regulation adds time and costs
State and local governments play a big role in the homebuilding industry by setting rules and regulations related to labor, the environment, community integrity, building codes, and more. The National Association of Homebuilders estimates that regulations imposed by governments at all levels account for roughly 24% of the final price of a new single-family home.
Pandemic-induced disruptions only made matters worse. The most prominent one is a labor shortage, similar to that experienced in the construction industry. Local municipalities found themselves understaffed resulting increased timelines for entitlements, permitting, inspections and other government services. This, in turn, increased costs for builders and developers. These issues have yet to abate.
Resistance from local NIMBYs
NIMBY or “not in my backyard” represents resistance to new development over fear of increased traffic, a strain on local resources like schools, pollution, and discomfort around who the new residents might be. The prevalence of local NIMBYism suppresses new construction as existing residents look to preserve the quality of life they have grown accustomed to. Without more construction, today’s large buyer pool is left competing for limited attainable housing supply.
Home prices have generally trended up over the past 50 years barring a few exceptions during slower economic times. Both the development community and policymakers are acutely aware of the need for more lower-priced housing, but the market conditions and structural factors laid out pose challenges.
Many builders are trying to adjust with denser communities, smaller homes, and infill developments, though many solutions are met by pushback from residents and local leaders.
Consumers need to reconsider their expectations as well. Homeownership allows for stability and wealth building, but the desired bells and whistles liked upgraded countertops and high ceilings have become increasingly limited in entry-level homes.
To achieve true attainable housing going forward, everyone will need to do their part. Consumers should plan for tradeoffs, builders should continue to seek innovative ways to provide more affordable housing, governmental bodies should drive for improved efficiencies, and NIMBY advocates should consider the negative impacts of constrained housing inventory.
Ali Wolf is the chief economist for Zonda, the largest new construction database in North America.