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
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
If someone promises you the “deal of a lifetime,” it’s probably not a good investment.
That’s what finance guru Matthew Onofrio, who sold a program claiming to have cracked the code on commercial real estate, promised inexperienced investors looking to strike it rich. But prosecutors say it was all a fraud aimed at lining Onofrio’s pockets.
The 31-year-old native of Eau Claire, Wis., appeared on investing podcasts and at conferences with a compelling tale. He said he had walked away from a promising career as a nurse anesthetist when he discovered a real estate strategy known as triple net investing, through which he had amassed a portfolio worth over $150 million in just three years.
But between 2020 and August of this year, federal prosecutors in Minnesota say, Onofrio had ripped off numerous banks to the tune of $35 million by roping investors into a complex web of quick-flip real estate sales, fraudulent mortgage applications and doctored appraisals.
In a statement, Onofrio’s attorney, Marsh Halberg, said none of his client’s investors had been hurt financially by their investments.
“The defense is aware of very few, if any, transactions where the investors have suffered actual losses at his time. We believe most of the transactions with Mr. Onofrio still maintain a positive cash flow and /or an increase in the value of the property that was purchased,” Halberg wrote in an email.
A civil suit filed this year involving a radiologist from Puerto Rico named Matthew Hermann, who wanted to get involved in real estate investing with his wife, laid out how Onofrio operated.
The suit said the pair met at a networking conference in Colorado in 2020 and hit it off while discussing real estate opportunities. Hermann said he was hoping to build up a real estate portfolio that would provide him with enough income that he could stop working.
Hermann said in court papers that Onofrio offered to bring him into “the deal of a lifetime,” involving a commercial property for sale for $6.3 million in Minneapolis. All Hermann had to do was come up with $1.5 million for the down payment.
“Onofrio told Hermann that he won’t get to his goal of leaving his job by buying duplexes. Onofrio told him that ‘this will light gas on the fire of where you need to go’. He told Hermann that this is all about mindset’,” the court documents read.
When Hermann said he didn’t have that kind of money available, Onofrio offered to lend it to him so he could secure a bank loan for the purchase and Hermann agreed, the court filings said. What Onofrio didn’t say was that he had already reached a deal with the owners to buy the building for $4.75 million, not $6.3 million, and that the difference was going into his pocket, the suit claimed.
Hermann was then stuck paying nearly $6,000 a month in loan payments to Onofrio in addition to his bank loan.
“Onofrio pushed Hermann—a novice with real estate—into this purchase with grand promises of the deal of lifetime. The reality, though, was that Onofrio was the one assured to make money on the deal, not Hermann,” the papers read.
Hermann later tried to sell the property and said he found a buyer willing to pay $6.3 million for it, but the deal fell through due to litigation surrounding Onofrio’s loan.
Hermann’s attorney didn’t respond to a message seeking comment.
Federal prosecutors described a similar pattern, with Onofrio allegedly placing his own money into investors’ accounts to make their finances look better to lenders, and also fabricating appraisal documents to inflate the value of properties.
In one deal in 2021, a Minneapolis commercial property was sold three times in just five months, passing through more than one business entity Onofrio controlled. By the end of the string of transactions, the price had jumped by nearly $4 million, business publication Finance & Commerce reported.
Onofrio is charged with three counts of bank fraud and prosecutors say they are seeking the forfeiture of $35 million seized during the course of the investigation.
BELFAST-based property developer Mayfair Group is threatening to instigate legal proceedings and seek damages from a leading property portal over its alleged refusal to allow it to advertise £9.5 million worth of homes for sale on its website.
Mayfair, which has active development interests across the UK and Ireland and which in the last 25 years has helped to build more than 2,000 homes, is taking the action against Propertynews.com, which is headquartered at Lough Road in Lurgan.
The case is being taken because Mayfair – which also carries out the functions of an estate agent, dealing with the sale of its own new properties and also the resale of some former homes – was told it “doesn’t meet the required criteria” to advertise on the Propertynews site, despite being allowed to do so on other portals.
Propertynews.com is owned by Lurgan-based firm GCD Technologies, a custom software development business, having been acquired last November from print and digital publisher Mediahuis.
Mayfair has now written to Propertynews putting it on notice of its intention to issue proceedings against it for breach of statutory duties under the Competition Act 1998 and the Enterprise Act 2002.
Mayfair’s legal representative is arguing that Propertynews is “abusing Mayfair’s dominant market position to unfairly prevent it from selling its own properties from its own estate agent business”, adding that blocking the advertisement of Mayfair homes is detrimental to consumers by limiting the properties advertised to them.
The developer’s estate agency division Mayfair Residential contacted Propertynews in April wanting to advertise the sale of a number of its properties including Henley on the seafront in Cultra for £950,000 and homes in Moira in the £258,000 to £358,000 range, and eight new homes at Thorburn Gate off Belfast’s Antrim Road for £169,950.
But in a series of emails exchanged between both parties, seen by the Irish News, Propertynews initially said its decision to accept the adverts was “being reviewed by its management team”.
It said it was issuing new terms and conditions to all agents with an updated definition of an agent to check that it matched the Mayfair business model: “An estate agent is an office that has a high street presence, represents more than one vendor and is not a sole representative of one developer or a group of developers that work together”.
After several more weeks of email correspondence, Propertynews contacted Mayfair Residential on June 13 to say: “From time to time, new innovations in the industry challenge our criteria and cause us to re-evaluate our rules. Your application is one such example.”
It adds: “As part of the Mayfair Group, and with the clear focus on your website towards new build developments from the Mayfair Group, your organisation blurs the lines between an estate agent and a property developer.
“Under our current eligibility guidelines, while you are only listing properties built by the Mayfair Group, you would not be eligible to list on Propertynews, in the same way that we do not allow private individuals or companies to list their own properties on our site.
“We would love to find a way to bring you on board which is why we have been actively discussing this matter at a board level internally and working with our estate agent partners to refine our terms for an evolving world.”
Mayfair Group director Victoria Patterson told the Irish News: “We have ambitious plans to deliver hundreds of new sustainable homes over the next five years and we look forward to making a number of significant announcements in the near future, and are keen to have this issue satisfactorily resolved.”
When asked by the Irish News for a comment, Propertynews said: “We don’t have any response to your business story but appreciate you reaching out.”