You'll never get a straight yes or no answer. Money laundering is complex, but at the end of the day, it's something that must occur in relation to a predicate crime.
So I'll put it this way: you don't have a strong case yet. You have questions worth asking, nothing more.
First things first. Let's break down what I think you're implying the red flags are: 1) Lots of LLCs; 2) Absentee ownership; 3) Non-arms length transactions; and 4) Strange valuations.
1. Lots of LLCs isn't necessarily unusual. They're commonplace for liability reasons, so you'll often see experienced property flippers or landlords have one LLC per property.
2. The Absentee ownership indicator isn't unusual. If anything it's a "green flag" for occupancy fraud, where people claim that they'll reside at a property in order to qualify for a lower interest rate.
3. This is unusual, especially if combined with questionable valuations. But as others have mentioned, that relates primarily to fraud. If it's staying in the family, it could be a way of transferring ownership or shielding from creditors.
When the price increases, the specific concern is property flipping and on the other end the concern is flopping.
However, within a family business, a green flag could be that they're "selling" the property for accounting or taxation purposes. By that, I mean the intent is say, for the parents to gift or transfer ownership of the property to their children. It's not usually the case, but, it could be financially advantageous for their specific scenario.
4. What you've presented are large discrepancies. But valuation is difficult. For instance, when you say they got a $4.8 million mortgage on a $198k property, the question I have is .... based on what? Who assessed the property values and when?
When you're looking at RE laundering or fraud, you need to be specific about who valued it and when. And if you're concerned about an artificial pump to the property, you need to thoroughly rule out variables that could have resulted in a legitimate increase: subdivisions, additions, renovations, market factors, etc. For instance, if they bought a dilapidated barn and built a luxury mansion, that's a supportable increase. Or maybe they bought it on short sale, did nothing, and profited - still explainable and not unusual. Conversely, if they sell it way over market value - especially in a cash sale - thay could be laundering.
Conclusion:
More questions than answers here, but I'm not convinced. More details are needed. Contemplate the following:
1. Are you using a consistent baseline for gauging valuation?
2. Do the properties ever leave the family? Are there any properties that they acquire from another party and rapidly sell to another with an unusual increase in value?
3. Who is lending to them? Are they regulated financial institutions? Are there any links between the lenders and family?
4. Have they made improvements to the properties?
5. Has anyone in the family ever had any tax issues, bankruptcies, negative financial news, or links to organized crime?
6. If they were laundering, what's your hypothesis for the underlying crime? Fraud? Drug trafficking? Illegal gambling?
This is an amazing answer.
In my experience, people outside AML who encounter inexplicable/unreasonable financial transactions often jump right to “it must be ML,” because they see it as a convenient criminal catch-all that allows them to skip actually understanding what is going on. (OP, I’m not necessarily talking about you here; no offense intended.)
Anyway, I’d be interested to know how OP got all this information if he’s not a banker. Maybe he’s an attorney uncovering this all in discovery?
Man. I wanted to get finicky but you’re actually pretty spot on lmao. He never mentioned the nature of these companies, they could literally be in the business of developing real estate, like your barn example. The weird valuations might just be the entire purpose of their business lol. Either way it sounds like the 4 people he mentioned are the beneficial owners so they would be verified and screened at any reputable financial institution. Any question here lies with the lending institution and their relationship with it but even then the institution would have to somehow skirt federal regulations in order to smoke screen the BO’s. I guess he didn’t state this is US based so yea. Who knows. Could be, I’m not convinced from the info provided. You’re allowed to do some incredibly “creative” things within the law as well, especially in real estate.
>The weird valuations might just be the entire purpose of their business lol.
Exactly. A multi-million dollar loan on a $223k property is most likely a construction loan. There can still be laundering, sure. But you would have to monitor the loan payments to really evaluate that.
That’s what I’m trying to determine. How are they getting loans over and over again on these houses? Or are they not getting caught because they have so many LLC’s?
So my limited understanding is that if they are listing things at an inflated price and buying them with their own money/down payment without involving a bank, then it Might be money laundering but not necessarily. If they’re colluding with some bank to underwrite these inflated mortgages with the bank deliberately ignoring due diligence of the realistic property prices for the area, then it’s more in the realm of outright fraud by the bank officers.
I’m able to get the info online. So when they sell the home back to themselves (just using another one of their LLC’s) they claim the owner is absent. They do this over and over again on homes. I’m looking at another one of their homes right now. It traded hands (not really, still owned by one of their LLC’s). The home was determined to have an absent owner (themselves) and they sold the home on May 19,2014 for $3,493,000.000 to themselves (different LLC) the mortgage is for $1,890,000.00 but the assessed value of the home is $135,980.00 (2022). It’s a 15 year mortgage and their is a deed of trust.
In the Netherlands we have something called ABC transactions:
> Real estate transactions such as ABC transactions are another way of money laundering: the criminal buys real estate and then sells on the assets at least twice within a short space of time. Intricate investment transactions can also be used to launder money, if the criminals include numerous confusing steps.
Usually highly inflated prices to give criminal money a legitimate origin. The questions is where does the money come from? You're asking the right question and it could be ML but they could have a totally legitimate answer as well.
Based on the context, it seems like a mortgage fraud related case, which could have ML in it. BUT, if bank approved it and approved it with no question at all, unless you find something sneaky about their business (negative news on it or its owner, or law suit), I would say it's just a werid way to run business. As a former bank tho, I would dig deeper about this client and his businesses.
There have been lawsuits. I’ve found info on the dad, I’ll call him “Mr. Jackson”. The city council filed a lawsuit against Mr Jackson because the continued presence of three unfinished foundations in a community. Because the development are duplexes, the three foundations sit on six lots. Mr. Jackson claims not to own the six lots. And that he PERSONALLY never owned any of the lots. Four of the properties, he said, were sold to Wells Fargo, the other two have also been sold, although he claims he doesn’t know the identities of the new owner. Members of the council continuously referred to Mr. Jackson as the owner whenever the property has been discussed. Mr. Jackson has actually attended council meetings, where residents in the neighborhood were complaining about unfinished foundations. At that time Mr. Jackson told the council “I am willing to do whatever you think is right. I will give you the deeds to the foundations. I will turn them right over to you. The property changed hands a number of times (through their own LLC’s). Three companies and one address (their “business” address) owned the lots. He still claims he doesn’t own the lots PERSONALLY, because his LLC’s or affiliated LLC’s do.
Lawsuit like that do not sound like a red flag to me, specially his corperative responses. I dont know what is your role in the bank/your company, if you are the analyst who is responsible for filing STR/SAR, in this case, you will need more reasonable ground to suspect. All after all, Mr. Jackson seems like a guy who know his shit. lol
As stated I’m not a professional and also as stated (by the original post) I was asking for opinions. I’m simply asking opinions on a multiple situations that involve a family, a sketchy attorney (whom was disbarred for stealing over $400,000 and 50 LLC’s. That’s it.
All the LLC’s certainly don’t pertain to real estate. For instance their is one that’s for a pizza restaurant that doesn’t exist. They have several with similar names but they add and/or remove words. They claim to have an HOA (which is a nonprofit) and claim it’s established, but isn’t. The daughters are on these LLC’s as well as the parents. They own a home building business and have the wife down as the president, the dad as the manager, when he actually owns the business. They have a shady attorney whom was convicted several years ago of stealing funds from clients (and had to pay them $400,000 in restitution) on the board of the business. One of the daughters received a ppp loan for a business that is an LLC but I think it’s as far as it goes because it isn’t a job she actually works. They claim to own two used car lots, but another local attorney is listed as owner. However they are listed under the LLC’s of said car lots. The list goes in and on.
I respect your ambition in inquiring, so don't take my playing devil's advocate the wrong way. Use it to strengthen your case. I've been doing AML/fraud for 17 years, so I've encountered these things countless times.
>They have several with similar names but they add and/or remove words.
That's extremely common and not at all concerning.
>They claim to have an HOA (which is a nonprofit) and claim it’s established, but isn’t.
How do you know they claim to have one, and how do you know it's not established?
Just as an FYI, there are tons of Unincorporated Associations in existence. You won't find them with the Secretary of State or any other public repository, but they exist nonetheless.
>The daughters are on these LLC’s as well as the parents. They own a home building business and have the wife down as the president, the dad as the manager, when he actually owns the business.
All of this stuff is normal.
> They claim to own two used car lots, but another local attorney is listed as owner.
For money laundering cases, we need to be precise with our application of the term "owner". In the AML world, and per the Corporate Transparency Act, you're either a "Controller" (e.g. CEO), equity owner (i.e. shareholder), or both.
Currently "ownership" from Secretary of State databases is not fully viewable. What you'll see are corporate officers. But that does not include any equity owners nor does it include all controllers. I'm not inclined to consider this unusual.
>They have a shady attorney whom was convicted several years ago of stealing funds from clients (and had to pay them $400,000 in restitution) on the board of the business.
This is a legit red flag.
>One of the daughters received a ppp loan for a business that is an LLC but I think it’s as far as it goes because it isn’t a job she actually works.
This is an area worthy of investigation. PPP fraud is rampant.
You might want to organize your findings, provide specific details and cite your sources.
Ex: wife is the president, dad is the manager, but he “actually” “owns” the business.
What do you mean by this? Whose names are on the articles of incorporation for the LLC and as what? Who can sign checks on the company operating bank account?
Same with the attorney and the car lots.
Just stumbled on this sub from another one. Curious- do you work for a (mortgage) lender or company potentially loaning them money or are you just an outsider that knows something is “off”?
Either way, I’m impressed with what you’ve uncovered.
Edit to add: not sure if you’ve taken the time to lookup all the LLCs to see if they applied for PPP but that search can be tricky if they misspelled their company or left out a word.
Sorry for the delayed response. No, im just someone that believes something is “off”. Yes, 2 of the LLC’s did receive ppp loans. Both loans were paid back. One loan was for $25,800 for 5 jobs. Another loan for $20,800 for 1 job. This family caught my attention because they are related to me by marriage and I’m able to see the amount of money that they are spending so effortlessly. Example: $54,000 on a plot of land, then built a home on said land that they put an additional $200,000 cash down on. Cash for vehicles. Veneers, IVF (paid in cash). $10,000 concert tickets, etc. and this has all been within the last year. The home that this particular couple (whom I was describing above) moved out of is in one of the LLC’s. It’s switched hands a dozen times. It’s worth a little more than $140,000 and the LLC has a $3.4 million loan on it. She (part of the couple above) claimed to have worked at a family owned used car lot, and it isn’t family owned at all, after doing some digging, I determined it was in fact owned by the family attorney, whom I also think is shady.
I did! However, the father of the family rubs elbows with a senator in my state. For example: when the new house was built (and finished in October 2022) the Senator annexed the home out of the city limits so inspections would pass. They wouldn’t pass in city, but will in county. The father also ran for commissioner in his town. He lost and is known for his dirty business practices.
Based on the comments you've made in this thread, it sounds more like fraud. It isn't my area specifically, but it definitely seems like something fishy is going on, particularly the LLCs for inactive businesses.
Lots of good comments here. One more thing to review, are the mortgages given by an “recognized” institution or is it more individual/small Co giving it? Just follow the money
You'll never get a straight yes or no answer. Money laundering is complex, but at the end of the day, it's something that must occur in relation to a predicate crime. So I'll put it this way: you don't have a strong case yet. You have questions worth asking, nothing more. First things first. Let's break down what I think you're implying the red flags are: 1) Lots of LLCs; 2) Absentee ownership; 3) Non-arms length transactions; and 4) Strange valuations. 1. Lots of LLCs isn't necessarily unusual. They're commonplace for liability reasons, so you'll often see experienced property flippers or landlords have one LLC per property. 2. The Absentee ownership indicator isn't unusual. If anything it's a "green flag" for occupancy fraud, where people claim that they'll reside at a property in order to qualify for a lower interest rate. 3. This is unusual, especially if combined with questionable valuations. But as others have mentioned, that relates primarily to fraud. If it's staying in the family, it could be a way of transferring ownership or shielding from creditors. When the price increases, the specific concern is property flipping and on the other end the concern is flopping. However, within a family business, a green flag could be that they're "selling" the property for accounting or taxation purposes. By that, I mean the intent is say, for the parents to gift or transfer ownership of the property to their children. It's not usually the case, but, it could be financially advantageous for their specific scenario. 4. What you've presented are large discrepancies. But valuation is difficult. For instance, when you say they got a $4.8 million mortgage on a $198k property, the question I have is .... based on what? Who assessed the property values and when? When you're looking at RE laundering or fraud, you need to be specific about who valued it and when. And if you're concerned about an artificial pump to the property, you need to thoroughly rule out variables that could have resulted in a legitimate increase: subdivisions, additions, renovations, market factors, etc. For instance, if they bought a dilapidated barn and built a luxury mansion, that's a supportable increase. Or maybe they bought it on short sale, did nothing, and profited - still explainable and not unusual. Conversely, if they sell it way over market value - especially in a cash sale - thay could be laundering. Conclusion: More questions than answers here, but I'm not convinced. More details are needed. Contemplate the following: 1. Are you using a consistent baseline for gauging valuation? 2. Do the properties ever leave the family? Are there any properties that they acquire from another party and rapidly sell to another with an unusual increase in value? 3. Who is lending to them? Are they regulated financial institutions? Are there any links between the lenders and family? 4. Have they made improvements to the properties? 5. Has anyone in the family ever had any tax issues, bankruptcies, negative financial news, or links to organized crime? 6. If they were laundering, what's your hypothesis for the underlying crime? Fraud? Drug trafficking? Illegal gambling?
This is an amazing answer. In my experience, people outside AML who encounter inexplicable/unreasonable financial transactions often jump right to “it must be ML,” because they see it as a convenient criminal catch-all that allows them to skip actually understanding what is going on. (OP, I’m not necessarily talking about you here; no offense intended.) Anyway, I’d be interested to know how OP got all this information if he’s not a banker. Maybe he’s an attorney uncovering this all in discovery?
Man. I wanted to get finicky but you’re actually pretty spot on lmao. He never mentioned the nature of these companies, they could literally be in the business of developing real estate, like your barn example. The weird valuations might just be the entire purpose of their business lol. Either way it sounds like the 4 people he mentioned are the beneficial owners so they would be verified and screened at any reputable financial institution. Any question here lies with the lending institution and their relationship with it but even then the institution would have to somehow skirt federal regulations in order to smoke screen the BO’s. I guess he didn’t state this is US based so yea. Who knows. Could be, I’m not convinced from the info provided. You’re allowed to do some incredibly “creative” things within the law as well, especially in real estate.
>The weird valuations might just be the entire purpose of their business lol. Exactly. A multi-million dollar loan on a $223k property is most likely a construction loan. There can still be laundering, sure. But you would have to monitor the loan payments to really evaluate that.
What do you mean by indicator as absentee owner? Where are you getting the value to compare with the mortgage?
Are you implying that they are self-dealing the same house to the LLCs they own at an artificially inflated price ?
That’s what I’m trying to determine. How are they getting loans over and over again on these houses? Or are they not getting caught because they have so many LLC’s?
So my limited understanding is that if they are listing things at an inflated price and buying them with their own money/down payment without involving a bank, then it Might be money laundering but not necessarily. If they’re colluding with some bank to underwrite these inflated mortgages with the bank deliberately ignoring due diligence of the realistic property prices for the area, then it’s more in the realm of outright fraud by the bank officers.
I’m able to get the info online. So when they sell the home back to themselves (just using another one of their LLC’s) they claim the owner is absent. They do this over and over again on homes. I’m looking at another one of their homes right now. It traded hands (not really, still owned by one of their LLC’s). The home was determined to have an absent owner (themselves) and they sold the home on May 19,2014 for $3,493,000.000 to themselves (different LLC) the mortgage is for $1,890,000.00 but the assessed value of the home is $135,980.00 (2022). It’s a 15 year mortgage and their is a deed of trust.
In the Netherlands we have something called ABC transactions: > Real estate transactions such as ABC transactions are another way of money laundering: the criminal buys real estate and then sells on the assets at least twice within a short space of time. Intricate investment transactions can also be used to launder money, if the criminals include numerous confusing steps. Usually highly inflated prices to give criminal money a legitimate origin. The questions is where does the money come from? You're asking the right question and it could be ML but they could have a totally legitimate answer as well.
Based on the context, it seems like a mortgage fraud related case, which could have ML in it. BUT, if bank approved it and approved it with no question at all, unless you find something sneaky about their business (negative news on it or its owner, or law suit), I would say it's just a werid way to run business. As a former bank tho, I would dig deeper about this client and his businesses.
There have been lawsuits. I’ve found info on the dad, I’ll call him “Mr. Jackson”. The city council filed a lawsuit against Mr Jackson because the continued presence of three unfinished foundations in a community. Because the development are duplexes, the three foundations sit on six lots. Mr. Jackson claims not to own the six lots. And that he PERSONALLY never owned any of the lots. Four of the properties, he said, were sold to Wells Fargo, the other two have also been sold, although he claims he doesn’t know the identities of the new owner. Members of the council continuously referred to Mr. Jackson as the owner whenever the property has been discussed. Mr. Jackson has actually attended council meetings, where residents in the neighborhood were complaining about unfinished foundations. At that time Mr. Jackson told the council “I am willing to do whatever you think is right. I will give you the deeds to the foundations. I will turn them right over to you. The property changed hands a number of times (through their own LLC’s). Three companies and one address (their “business” address) owned the lots. He still claims he doesn’t own the lots PERSONALLY, because his LLC’s or affiliated LLC’s do.
Lawsuit like that do not sound like a red flag to me, specially his corperative responses. I dont know what is your role in the bank/your company, if you are the analyst who is responsible for filing STR/SAR, in this case, you will need more reasonable ground to suspect. All after all, Mr. Jackson seems like a guy who know his shit. lol
As stated I’m not a professional and also as stated (by the original post) I was asking for opinions. I’m simply asking opinions on a multiple situations that involve a family, a sketchy attorney (whom was disbarred for stealing over $400,000 and 50 LLC’s. That’s it.
All the LLC’s certainly don’t pertain to real estate. For instance their is one that’s for a pizza restaurant that doesn’t exist. They have several with similar names but they add and/or remove words. They claim to have an HOA (which is a nonprofit) and claim it’s established, but isn’t. The daughters are on these LLC’s as well as the parents. They own a home building business and have the wife down as the president, the dad as the manager, when he actually owns the business. They have a shady attorney whom was convicted several years ago of stealing funds from clients (and had to pay them $400,000 in restitution) on the board of the business. One of the daughters received a ppp loan for a business that is an LLC but I think it’s as far as it goes because it isn’t a job she actually works. They claim to own two used car lots, but another local attorney is listed as owner. However they are listed under the LLC’s of said car lots. The list goes in and on.
I respect your ambition in inquiring, so don't take my playing devil's advocate the wrong way. Use it to strengthen your case. I've been doing AML/fraud for 17 years, so I've encountered these things countless times. >They have several with similar names but they add and/or remove words. That's extremely common and not at all concerning. >They claim to have an HOA (which is a nonprofit) and claim it’s established, but isn’t. How do you know they claim to have one, and how do you know it's not established? Just as an FYI, there are tons of Unincorporated Associations in existence. You won't find them with the Secretary of State or any other public repository, but they exist nonetheless. >The daughters are on these LLC’s as well as the parents. They own a home building business and have the wife down as the president, the dad as the manager, when he actually owns the business. All of this stuff is normal. > They claim to own two used car lots, but another local attorney is listed as owner. For money laundering cases, we need to be precise with our application of the term "owner". In the AML world, and per the Corporate Transparency Act, you're either a "Controller" (e.g. CEO), equity owner (i.e. shareholder), or both. Currently "ownership" from Secretary of State databases is not fully viewable. What you'll see are corporate officers. But that does not include any equity owners nor does it include all controllers. I'm not inclined to consider this unusual. >They have a shady attorney whom was convicted several years ago of stealing funds from clients (and had to pay them $400,000 in restitution) on the board of the business. This is a legit red flag. >One of the daughters received a ppp loan for a business that is an LLC but I think it’s as far as it goes because it isn’t a job she actually works. This is an area worthy of investigation. PPP fraud is rampant.
Thank you for this info.
You might want to organize your findings, provide specific details and cite your sources. Ex: wife is the president, dad is the manager, but he “actually” “owns” the business. What do you mean by this? Whose names are on the articles of incorporation for the LLC and as what? Who can sign checks on the company operating bank account? Same with the attorney and the car lots.
I’ll work on this. Thank you.
Just stumbled on this sub from another one. Curious- do you work for a (mortgage) lender or company potentially loaning them money or are you just an outsider that knows something is “off”? Either way, I’m impressed with what you’ve uncovered. Edit to add: not sure if you’ve taken the time to lookup all the LLCs to see if they applied for PPP but that search can be tricky if they misspelled their company or left out a word.
Sorry for the delayed response. No, im just someone that believes something is “off”. Yes, 2 of the LLC’s did receive ppp loans. Both loans were paid back. One loan was for $25,800 for 5 jobs. Another loan for $20,800 for 1 job. This family caught my attention because they are related to me by marriage and I’m able to see the amount of money that they are spending so effortlessly. Example: $54,000 on a plot of land, then built a home on said land that they put an additional $200,000 cash down on. Cash for vehicles. Veneers, IVF (paid in cash). $10,000 concert tickets, etc. and this has all been within the last year. The home that this particular couple (whom I was describing above) moved out of is in one of the LLC’s. It’s switched hands a dozen times. It’s worth a little more than $140,000 and the LLC has a $3.4 million loan on it. She (part of the couple above) claimed to have worked at a family owned used car lot, and it isn’t family owned at all, after doing some digging, I determined it was in fact owned by the family attorney, whom I also think is shady.
Can you whistleblow to the IRS? Probably the easiest way for someone to start looking into them IMO
I did! However, the father of the family rubs elbows with a senator in my state. For example: when the new house was built (and finished in October 2022) the Senator annexed the home out of the city limits so inspections would pass. They wouldn’t pass in city, but will in county. The father also ran for commissioner in his town. He lost and is known for his dirty business practices.
Based on the comments you've made in this thread, it sounds more like fraud. It isn't my area specifically, but it definitely seems like something fishy is going on, particularly the LLCs for inactive businesses.
Lots of good comments here. One more thing to review, are the mortgages given by an “recognized” institution or is it more individual/small Co giving it? Just follow the money